Can the Internal Revenue Service silence a president’s political adversaries by using secret policies? It seems that we’re about to find out. The 17th century French politician and finance minister, Jean-Baptiste Colbert, once quipped that, “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of squawking.” Apparently, the goose does squawk.
Almost unnoticed, a small educational nonprofit called Z Street, located in eastern Pennsylvania, won a major victory for freedom of expression last month. Understanding this decision requires a review of the background that led to the ruling.
Z Street is a proud promoter of Zionism and stands in opposition to the larger and more vocal J Street, which is a tax-exempt nonprofit that represents the left-leaning wing of the American Jewish community. According to court filings, Z Street discovered in late 2009 that its application for tax-exempt status was delayed and under consideration by a special “Israel Task Force.” Apparently, this task force was reviewing Z Street’s activities, rhetoric, and governance. The IRS asked specific questions about Z Street’s political beliefs and educational content including, “Does your organization support the existence of the land of Israel?” Z Street understood immediately that its religious and political commitment to Israel’s existence as a nation had crossed swords with White House policy.
Z Street sued the IRS in early 2010 for engaging in viewpoint discrimination. Some members of the media suggested that the administration was using the IRS to control its critics.
But when Z Street squawked, the regulators fought back, arguing that the organization had no right to sue until a decision regarding its tax-exempt status had been rendered. That decision could take some time, of course. Such a delay on the part of the IRS would effectively silence a Zionist voice and destroy its opposition to President Obama’s stated hope for a two-state solution in the Middle East. One cannot appeal a decision that is delayed indefinitely.
To its credit, Z Street filed a separate request that was summarized in a May 28 decision. Judge Ketanji Brown Jackson explained in her ruling “that the plaintiff [Z Street] alleges that the Internal Revenue Service violated the First Amendment when it implemented an internal review policy that subjected Israel-related organizations that are applying for tax-exempt status … to more rigorous review procedures than other organizations applying for that same status.” Using words like “faulty” and “mistaken” to describe the IRS’s arguments, Judge Jackson supported Z Street’s request to sue for discovery. Indeed, the very thorough ruling weaved through law history and complex tax law to show that the government was “wrong to argue” that it could not be sued. This case, Jackson understood, was not about a decision (if it were, they would have to wait for the decision to be made), but about the process used in the application of criteria. Z Street was “correct that it is permitted to press its constitutional claim in federal court.” As to the the IRS’s position, Jackson chided the agency: “Defendant struggles mightily to transform a lawsuit that clearly challenges the constitutionality of the process that the IRS allegedly employs when it determines the tax-exempt status of certain organizations into a dispute over tax liability as a means of attempting to thwart this action’s advancement.”
Since at least 2010, the American public has reeled from revelations that the federal agency charged with assessing and collecting taxes applied inappropriate, or at least disproportionate, pressure to several nonprofit organizations that were seeking tax-exempt status at the federal level. The IRS seemed to be unusually inquisitive of non-profit groups whose names indicated to the agency that they were connected with the Tea Party, the 9/12 movement, or other right-leaning political and social movements. For the most part, the targeted groups engaged in education and advocacy efforts related to domestic affairs.
Today, the IRS continues to review the vast majority of these applications. Many groups have simply shuttered because they are at a significant disadvantage for fundraising. But now we know that it is legal to ask about the process the agency is using. It’s okay to expect the Constitution will be upheld when tax-exempt applications are under consideration. It’s fair for the public to know the principles behind the policies that motivate IRS decisions.
So, can the IRS be used to silence a president’s political adversaries? Thanks to Z Street we are about to find out. Squawk on, Z Street, squawk on.