Commentary Magazine


Topic: Z Street

One Chance to Hold the IRS Accountable?

Though the IRS and its commissioner have been on the hot seat in recent congressional hearings, there is little doubt that the agency and the Obama administration believe they can ride out the storm by stonewalling Republicans asking questions about the scandal and the missing emails that are now at the center of the controversy. But an otherwise obscure legal challenge to the tax-collecting bureaucracy may hold the key to bringing some measure of accountability to the nation’s tax collectors.

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Though the IRS and its commissioner have been on the hot seat in recent congressional hearings, there is little doubt that the agency and the Obama administration believe they can ride out the storm by stonewalling Republicans asking questions about the scandal and the missing emails that are now at the center of the controversy. But an otherwise obscure legal challenge to the tax-collecting bureaucracy may hold the key to bringing some measure of accountability to the nation’s tax collectors.

As we’ve noted numerous times here, there are still a lot of unanswered questions about how and why the IRS singled out conservative groups for scrutiny when they applied for tax-exempt status. But concern about this blatantly illegal political bias has been only compounded by the revelation that the emails of the woman at the center of the affair—department chief Lois Lerner—were lost in a mysterious computer crash. It now turns out that not only was the damaged computer hard drive recycled but that the agency also erased its own email servers. As has been pointed out repeatedly by IRS critics, taxpayers and corporations are required by law to preserve all of their communications for seven years in case they might be audited. But the IRS, a government body with nearly unlimited powers to wreck the lives of individuals that come under its scrutiny, doesn’t live by the same laws that they rigorously enforce against ordinary citizens.

But despite the suspicious nature of the missing emails and the fact that the agency cancelled the contract of the IT service provider at the same time that it lost vital information at the heart of this scandal, there seems little that critics can do about it other than to hound IRS Commissioner John Koskinen in hearings. Though his story is merely a sophisticated version of the old “dog ate my homework” excuse, Koskinen hasn’t lost his cool or cracked under the pressure. That’s due to what appears to be a thick hide and his confidence that congressional Democrats will always cover for the administration no matter how outrageous its behavior. Since Lerner has pled the Fifth Amendment in her attempt to avoid answering questions and Attorney General Eric Holder will never launch a genuine investigation of this affair or appoint a special prosecutor, it doesn’t seem like the angry Republicans can do much but to huff and puff at Koskinen or any other hapless IRS official that attempts to tell the same lame story he’s been trying to sell Congress.

But, as I noted last month, there appears to be one hope, albeit a slim one, for some measure of accountability about the IRS’s unconstitutional behavior: a lawsuit by a small pro-Israel group that was told by agency employees that its application for non-profit status was being scrutinized because of its opposition to the Obama administration’s foreign policy.

After years of stonewalling the case, the IRS was dealt a staggering legal setback last month when a federal judge ordered that the agency must answer the lawsuit. That response is due today. But the events of the last few weeks in which we have learned of the disappearance of Lerner’s emails makes it all the more interesting since as the defendant in the case, the IRS had the obligation to preserve all records relating to the alleged discrimination against Z Street. Since Lerner was the official supervising those who were dealing with Z Street during this period, that makes the missing evidence even more crucial. Moreover, as the plaintiffs pursue their case they will have the ability to compel IRS officials to testify as to their practices and produce all records. If they don’t that will only strengthen Z Street’s case.

Though Congress may not be able to do more than rail at Koskinen and the IRS, the Z Street case will not only open up a window on their behavior but, as the Wall Street Journal editorial page wrote earlier this week:

Attorney General Eric Holder won’t name a special prosecutor, but there’s still plenty of room for the judge in the Z Street case to force the IRS to explain and answer for its “willful spoliation” of email evidence.

The spectacle of a ruthless tax agency acting illegally and with seeming impunity undermines the rule of law and faith in our democratic system. And since neither Democrats nor their cheering section in the media appear willing to rise up and pressure the administration to appoint a prosecutor who will investigate these extremely suspicious coincidences and missing evidence (which would have liberals screaming for impeachment if the two sides were reversed and a Republican administration behaved in this manner), not much may happen to anyone in the scandal and the agency may escape accountability. But the Z Street suit has the potential to reveal more about this scandal than all the committees in Congress may ever be able to produce.

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Phony Scandal? Courts Open Window on the IRS’s Political Litmus Tests

Interest in the Internal Revenue Service’s outrageous practice of subjecting politically conservative groups to discriminatory treatment has died down a bit since the revelations about this scandal first hit the news a year ago. But a court decision that was handed down earlier this week about a similar instance of potential government misconduct may shed more light on the way the Tea Party and other right-wing organizations were given the business by Lois Lerner and the rest of what appears to be a highly politicized bureaucracy at the heart of our tax collection system.

On Tuesday, Federal Judge Ketanje Brown Jackson issued the first substantive ruling in any suit that challenged the IRS’s pose of political neutrality under the Obama administration. The case concerns Z Street, a Philadelphia area-based pro-Israel organization that filed for tax-exempt status in December 2009 because of its role in educating the public about Israel and the Middle East conflict. The group’s founder Lori Lowenthal Marcus wrote in the Jewish Press this week about what followed:

On July 19, 2010, when counsel for Z STREET spoke with the IRS agent to whom the organization’s application had been assigned, that agent said that a determination on Z STREET’s application may be further delayed because the IRS gave “special scrutiny” to organizations connected to Israel and especially to those whose views “contradict those of the administration’s.”

Z Street subsequently sued the government and rightly argued that its constitutional rights had been violated because of the “viewpoint discrimination” that the IRS agent had openly displayed. Now after years of delays, Judge Jackson has ruled that by asserting that Z Street had no right to sue, the government had tried to “transform a lawsuit that clearly challenges the constitutionality of the process … into a dispute over tax liability.” She similarly dismissed the government’s claims of sovereign immunity.

What has this got to do with the Tea Party and its complaints? Plenty.

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Interest in the Internal Revenue Service’s outrageous practice of subjecting politically conservative groups to discriminatory treatment has died down a bit since the revelations about this scandal first hit the news a year ago. But a court decision that was handed down earlier this week about a similar instance of potential government misconduct may shed more light on the way the Tea Party and other right-wing organizations were given the business by Lois Lerner and the rest of what appears to be a highly politicized bureaucracy at the heart of our tax collection system.

On Tuesday, Federal Judge Ketanje Brown Jackson issued the first substantive ruling in any suit that challenged the IRS’s pose of political neutrality under the Obama administration. The case concerns Z Street, a Philadelphia area-based pro-Israel organization that filed for tax-exempt status in December 2009 because of its role in educating the public about Israel and the Middle East conflict. The group’s founder Lori Lowenthal Marcus wrote in the Jewish Press this week about what followed:

On July 19, 2010, when counsel for Z STREET spoke with the IRS agent to whom the organization’s application had been assigned, that agent said that a determination on Z STREET’s application may be further delayed because the IRS gave “special scrutiny” to organizations connected to Israel and especially to those whose views “contradict those of the administration’s.”

Z Street subsequently sued the government and rightly argued that its constitutional rights had been violated because of the “viewpoint discrimination” that the IRS agent had openly displayed. Now after years of delays, Judge Jackson has ruled that by asserting that Z Street had no right to sue, the government had tried to “transform a lawsuit that clearly challenges the constitutionality of the process … into a dispute over tax liability.” She similarly dismissed the government’s claims of sovereign immunity.

What has this got to do with the Tea Party and its complaints? Plenty.

As the Wall Street Journal editorial page noted yesterday:

This ruling will force the IRS to open its books on the procedures it used and decisions it made reviewing Z Street’s tax-exempt application, procedures it has tried to keep shrouded. As the case proceeds, Z Street’s attorneys can seek depositions from many who have been part of the larger attempt to sit on similar applications by other conservative groups.

In other words, this case may be the straw that breaks the camel’s back of the IRS’s politically prejudicial policies. If an IRS agent can reject or stall a pro-Israel group’s application on the grounds that “these cases are being sent to a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies,” then no group, no matter what its political orientation or cause is safe from being subjected to a political litmus test designed by any administration of either political party.

Z Street’s Marcus deserves praise for having the guts to persist in her challenge to the government for years even though the media had little interest in publicizing what appeared to be an outrageous example of how the IRS had become politicized under the Obama presidency. Last year Marcus learned she wasn’t alone when the news about the Tea Party broke. Now, as her legal process unfolds, Americans may get a better idea about how broken the system has become.

Using the IRS to punish political foes is blatantly illegal. If, as we suspect, the Z Street case reveals the sort of internal email traffic that will reveal how widespread this practice has become in the last five years, perhaps even a liberal mainstream press that still thinks the problems at the IRS are a “phony scandal” will start to pay attention.

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