Washington — As the Internal Revenue Service reels from revelations that it targeted Tea Party groups’ tax-exempt applications for extra scrutiny, Jewish groups from the left and right are seeking to draw attention to a less noticed reality they say they face: Groups with ties to Israel seem to be drawing extra IRS scrutiny, too.
Several Jewish not-for-profit organizations have faced extensive questioning on their ties to Israel when applying for tax-exempt status, the Forward has learned, leading to a lengthy approval process.
Two Jewish groups from two ends of the political spectrum have recently gone through the process. Each had a different experience, and each reached a different conclusion, but both share the feeling that getting a tax-exempt status for groups dealing with Israel is a long and, at times, painful process.
“Israel is in a bad neighborhood, and as soon as you file the request to the IRS, you hit a red flag and they push a button and out comes a bunch of questions,” said Marcia Eisenberg, an attorney who recently represented Ameinu, a self-described progressive Zionist organization seeking tax exemption. Lori Lowenthal Marcus, co-founder and president of Z Street, a right-wing group that also applied for exemption, called the process “non-sensible” and accused the IRS of wrongfully singling out organizations relating to Israel, and focusing on right-wing groups in particular.
The IRS rejected any notion that not-for-profits related to Israel are targeted specifically. Any group transferring funds overseas, IRS officials say, is carefully checked to make sure that money does not reach terror organizations.
The national controversy over IRS practices broke in May, when it was revealed that the agency’s Cincinnati office, which processes applications for tax-exempt status from not-for-profit organizations, employed intense scrutiny when dealing with applications from groups thought to be affiliated with the Tea Party movement. The groups had asked for recognition under section 501(c)(4) of the tax code, which would exempt them from paying taxes for their income but not allow individuals who donate to them to deduct the contributions from their taxes.
In the political firestorm that ensued, Republican lawmakers accused the IRS of a politically motivated decision to impose difficulties on organizations critical of the Obama administration — a charge that both the White House and the IRS officials involved deny.
The controversy did not touch directly on the Jewish groups in question. In most cases these groups filed applications for exemption under a different tax code section, 501(c)(3), which classifies them as public charities and allows donors to these groups them to claim tax deductions for their contributions. Due to this privilege, the IRS submits applications for status as public charities to its highest level of scrutiny in any event.
Hiam Simon, Ameinu’s national director, has on his desk a 4-inch thick file containing the group’s correspondence with the IRS. It represents five years of work on the group’s request for tax-exempt status, although only the last year has been subject to an intense back-and-forth with the IRS over questions relating to Israel.