The IRS has stuck by its story that tax-exempt applications by conservatives got slow-rolled because of bureaucratic bungling not because the groups opposed President Obama’s policies. Now the slow drip of email evidence to congressional investigators is casting further doubt on that tale.
In 2009 the Pennsylvania group Z Street applied for tax-exempt status for its mission of educating people about Israel-related issues. In 2010 an IRS agent told Z Street that its application was delayed because the tax agency’s Washington, D.C. office was giving special scrutiny to groups whose missions might conflict with Administration policies. The IRS’s “Be On the Lookout” list that November also included red flags for groups referring to “disputed territories.”
Z Street sued in August 2010 for viewpoint discrimination and its case is headed for discovery in federal court. Now emails uncovered by the House Ways and Means Committee show that the IRS and State Department were conferring in 2009 about pro-Israel groups like Z Street and considering arguments to deny their tax-exempt applications.
In an April 16, 2009 email, Treasury attache to the U.S. consulate in Jerusalem Katherine Bauer sent IRS and Treasury colleagues a 1997 JTA News article sent to her by State Department foreign service officer Breeann McCusker. The subject was whether 501(c) groups buying land in Israel’s disputed territories were engaged in “possible violations of U.S. tax laws.” The article chronicles the controversy and whether “ideological activity” can “legally be financed with the help of U.S. [tax] dollars.”
“Thought you might find the below article of interest – looks like we’ve been down this road before,” Ms. Bauer wrote. “Although I believe you’ve said you can’t speak to on-going investigations, I thought it was worth flagging the 1997 investigation mentioned below for you if it can be of any use internally when looking for precedence [sic] for the current cases.” A Treasury spokesman declined comment on Ms. Bauer’s behalf.
The “current cases” would have been applications like Z Street’s in which Israel-related activity was apparently being scrutinized for its ideological and policy content. The government says Z Street got special scrutiny because it was focused in a region with a higher risk of terrorism, which is hard to believe and in any case doesn’t explain all of the IRS’s behavior.
It doesn’t cover, for instance, why one questionnaire we’ve seen from the IRS to another Jewish group applying for tax-exempt status asked, “Does your organization support the existence of the land of Israel?” and “Describe your organization’s religious belief system toward the land of Israel.” No matter the answers, they should not affect the processing of an application for 501(c) status. The State-IRS emails reveal a political motivation for IRS scrutiny that gives Z Street powerful evidence for its suit charging IRS bias.
On Monday the IRS filed an appeal of the judge’s decision denying its motion to dismiss Z Street’s case. The government says the action stops all discovery while the appeal is pending, a process that could take months or even years. By filing the appeal on the last possible day, the Justice Department is running out the clock on discovery during the remainder of the Administration.
This is a whole lot of effort to prevent discovery in a case that is not even seeking damages. Ways and Means uncovered the email exchange between State and the IRS only after Treasury was forced to turn over documents it had previously withheld. What else did it lose in the ether?