Justice Department settles with pro-Israel group for delay in tax-exempt status

The Justice Department settled with Z Street, a right-wing pro-Israel group that was for years denied tax exempt status.

The group complained that its 2009 application for U.S. tax-exempt status was being unduly scrutinized because of its connection to Israel. It was granted in 2016.

In a statement, the Justice department did not detail the settlement, but said the settlement agreement “includes an apology from the IRS to Z Street for the delayed processing of the group’s application for tax-exempt status.”

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The Justice Department statement also suggested that Z Street’s positions on Israel might also have been a factor in delaying its tax-exempt status. “Tax exemption eligibility should be based on whether an organization’s activities fulfill requirements of the law, not a group’s policy positions or the name chosen to reflect those views,” it said.

In a Wall Street Journal op-ed published Feb. 2, Lori Lowenthal Marcus, a founder of Z Street, said the initial source of the lengthy review was an outdated IRS list of countries where there may be fundraising for terrorism, requiring further review for tax-exemption for groups fundraising in relation to those countries. Israel appeared on the old list. An updated list had removed Israel. PJC