Wall Street Journal | The IRS Goes to Court

Editorial Board, Wall Street Journal:

It isn’t every day that judges on the D.C. Circuit Court of Appeals declare themselves “shocked.” But that happened on Monday when an animated three-judge panel eviscerated the IRS and Justice Department during oral argument in a case alleging the agency delayed the tax-exempt application of a pro-Israel group due to its policy views.

In December 2009, Pennsylvania-based Z Street applied for 501(c)(3) status to pursue its pro-Israel educational mission. In July 2010, when the group called to check on what was taking so long, an IRS agent said that auditors had been instructed to give special attention to groups connected with Israel, and that they had sent some of those applications to a special IRS unit for additional review.

Z Street sued the IRS for viewpoint discrimination (Z Street v. Koskinen), and in May 2014 a federal district judge rejected the IRS’s motion to dismiss. The IRS appealed, a maneuver that halted discovery that could prove to be highly embarrassing. Justice says Z Street’s case should be dismissed because the Anti-Injunction Act bars litigation about “the assessment or collection of tax.” Problem is, Z Street isn’t suing for its tax-exempt status. It’s suing on grounds that the IRS can’t discriminate based on point of view.

The three judges—Chief Judge Merrick Garland, David Tatel and David Sentelle—were incredulous. You say they want a tax exemption, but that’s not the complaint, Judge Sentelle admonished government lawyer Teresa McLaughlin: “They are not in court seeking to restrain the assessment or collection of a tax, they are in court seeking a constitutionally fair process.”

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