The untalkative agency comes under scrutiny from a federal judge.
The
Internal Revenue Service continues to evade questions about its
handling of applications for tax-exempt status from groups whose
political views conflicted with the Obama Administration's.
That may change. A federal judge's ruling will force the agency to
defend itself in court and go through discovery on its handling of a
slow-tracked application.
In
2009 a Pennsylvania group called Z Street applied to the IRS for
tax-exempt status for its mission of educating people about Zionism and
other policies related to Israel and the Middle
East. In May 2010 the group received a request from the IRS for more
information, which it sent. According to Z Street's complaint, two
months later the agent in charge of reviewing the application told Z
Street's counsel she was holding up the application
because of her concerns that the group engaged in advocacy related to
the Middle East.
According
to the complaint, Agent Diane Gentry said that special attention was
given to Israel-related groups and 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." We've since learned that the agency's
November 2010 "Be On the Lookout" list also flagged agents to look out
for words related to Israel or "inflammatory" references
to "disputed territories."
In
August 2010, Z Street sued the IRS on grounds that the position amounts
to viewpoint discrimination and violates the First Amendment. The IRS
responded by claiming special protections,
including the Anti-Injunction Act, a law written to protect the IRS from
litigation that could interfere with its ability to collect revenue.
But
Washington, D.C. federal district Judge Ketanji Brown Jackson ruled
that the Anti-Injunction Act has not been interpreted by the courts as
preventing constitutional claims. In its
attempt to "thwart" the action, she wrote in denying the IRS motion to
dismiss, the IRS tries to "transform a lawsuit that clearly challenges
the constitutionality of the process . . . into a dispute over tax
liability."
The
IRS also tried to duck out under the sovereign immunity doctrine, which
was designed to deter lawsuits against the feds. But that claim fails,
Judge Jackson writes, because the Administrative
Procedures Act "waives sovereign immunity with respect to suits for
nonmonetary damages that allege wrongful action by an agency or its
officers or employees, and the instant lawsuit fits precisely those
criteria."
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.
It
will be fascinating to see which names— Lois Lerner, former head of IRS
tax-exempt scrutiny?—show up in the internal email traffic. The
Administration may have a harder time evading
accountability now that a judge will be supervising the testimony.
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