All Z Street — a conservative organization that speaks out on behalf of Israel — says it wants is for the IRS to review its application for tax-exempt status without discrimination, the same way it looks over all requests.
But during a two-hour hearing July 19 in U.S. District Court in Washington, D.C., U.S. Department of Justice attorney Andrew Strelka argued that it was not for a judge to decide if Z Street can obtain a tax-exempt status.
District Judge Ketanji Brown Jackson said she would take the matter under advisement, but did not say when she would rule.
Z Street applied for 501(c)(3) tax exempt status in 2009 and has been in limbo ever since as it awaited word from the IRS. Meanwhile, its funds have been frozen.
Jerome Marcus, attorney for Z Street, during the hearing said that the organization speaks out about the Middle East. “That’s all it does,” he said, adding that it is not engaged in lobbying or “any political activity at all,” which would bar it from tax-exempt status.
When Z Street inquired in 2010 why it had not received an answer to its tax exempt application, the IRA replied that “special scrutiny would be required,” because Z Street’s work revolved around Israel, where “there is a higher risk of of terrorism,” Marcus said.
The IRA was concerned that Z Street might be involved in “occupied terroritory advocacy,” which could be considered against the United State government’s policies, the group was told, according to Marcus.
According to an IRS affidavit, the government wanted to see if Z Street sends money to or lobbies for organizations or people within Israel, and in particular, those living over the Green Line.
Marcus disputed those claims, noting there was “nothing in our record to suggest” money was spent. Z Street is strictly an educational group, he stressed.
Strelka said Z Street should have waited for its tax-exempt application to be turned down before it went to court and that there was a proper recourse to obtain tax-exempt status through the IRS.
“It all comes down to the relief Z Street wants is relief of its own design,” Strelka said. “Z Street is trying to craft a perfect remedy that doesn’t exist for them,” he said.
Its status shouldn’t be determined in U.S. District Court, he said, adding it was not for Judge Jackson to grant Z Street tax-exempt status.
“Z Street is asking for the court to step into the tax-exempt status” before the IRS review is completed.
The judge asked Strelka why Z Street should have to wait, since it was the IRS that decided to put the matter on hold and freeze Z Street’s funds. Strelka explained that the process is on hold because Z Street filed its law suit.
Marcus argued Jackson’s courtroom was the place to be to ensure Z Street would get a fair review and that it wouldn’t have to deal with different rules just because it is involved with the Middle East.
“The one thing they seek is what they really, really, really don’t want to happen,” Marcus said, referring to his request that IRS admit it put Z Street through extra scrutiny. All Z Street wants is “an untainted process,” said Marcus.
Referring to an IRS review of organizations involved in countries with a heightened risk of terro, Marcus said,“There clearly is a policy. They just haven’t had the chutzpah to say it.”
The IRS needs to disclose any policy that affects someone’s First Amendment rights, he said.
But Strelka rebutted, noting, “Z Street keeps insisting and trying to drive this court into the specifics, and that is something we cannot do,” as the court has no jurisdiction.
Z Street’s troubles with the IRS are different than some conservative groups that claim the IRS unfairly treated them because they had certain buzz words in their name, including “tea party.” Those groups lobby and have a 501(c)(4) tax status.
Z Street is not affiliated with Zionist Organization of America (ZOA). However, Z Street founder and president Lori Lowenthal Marcus had been an officer in ZOA’s Philadelphia chapter.