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IRS targeting extended to pro-Israel outfits, group charges

US tax agency admits it put conservative groups under extra scrutiny, echoing ongoing lawsuit by Z Street that it was probed for being too pro-Israel

Tax forms. (photo credit: CC BY Moneyblognewz, Flickr)
Tax forms. (photo credit: CC BY Moneyblognewz, Flickr)

A pro-Israel group in the US says it was investigated by tax inspectors because of its Zionist slant, saying it suffered the same treatment as conservative groups, for which the IRS recently apologized.

The Z Street group has been suing the Internal Revenue Service since 2010, when it says a federal agent told the group’s lawyer that the IRS was “carefully scrutinizing organizations that are in any way connected with Israel.”

On Saturday, the IRS apologized for targeting groups based on political affiliations, following an official inquiry into whether the agency made illegal demands of conservative organizations.

“That was absolutely incorrect, it was insensitive and it was inappropriate. That’s not how we go about selecting cases for further review,” said Lois Lerner, who heads the IRS’s non-profits division.

Lerner said that about 300 groups were singled out for additional review, with about one-quarter scrutinized because they had “tea party” or “patriot” somewhere in their applications.

She said 150 of the cases have been closed and no group had its tax-exempt status revoked, though some withdrew their applications.

Z Street, which was founded in 2009 as a right-wing counterweight to the dovish J Street lobby and others, says that the IRS’s actions extended to pro-Israel groups that did not fit the Obama Administration’s line.

The IRS mea culpa points to “the same conduct the IRS agent told us (before she realized she shouldn’t) they were engaging in with respect to organizations ‘connected to Israel,’” Z Street head Lori Lowenthal Marcus told the BuzzFeed website.

Lowenthal Marcus alleged that the agent told her group that “a special unit” was checking whether her group was in line with administration policy, invoking a rarely used clause in the tax code that can be used to deny exempt status to extremist groups.

Writing in the Jewish Press on Saturday, Lowenthal Marcus wrote that another Jewish group, without any connection to Israel, had also been probed by the IRS for its beliefs on Israel.

“The IRS even took the position that because Israel is a country ‘where terrorism happens,’ the service was justified in taking additional time to determine whether Z Street was involved with funding terrorism,” she wrote.

The IRS said the activity was initiated by low level workers in Cincinnati, was not politically motivated and no senior officials were involved.

However, according to a draft of a watchdog’s report obtained Saturday by The Associated Press that seemingly contradicts public statements by the IRS commissioner, senior IRS officials knew agents were targeting tea party groups as early as 2011.

The Treasury Department’s inspector general for tax administration is expected to release the results of a nearly yearlong investigation in the coming week.

According to the report, on June 29, 2011, Lerner learned at a meeting that groups were being targeted, according to the watchdog’s report. At the meeting, she was told that groups with “Tea Party,” ”Patriot” or “9/12 Project” in their names were being flagged for additional and often burdensome scrutiny, the report says.

The 9/12 Project is a group started by conservative TV personality Glenn Beck.

Lerner instructed agents to change the criteria for flagging groups “immediately,” the report says.

Lerner did not say whether Z Street was among those targeted and the IRS declined to comment.

The pro-Israel group is scheduled to have a hearing in federal court in early July over the case.

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