EXHIBIT ACase 2:10-cv-04307-CMR Document 5-1 Filed 11/22/10 Page 1 of 6 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA ZSTREET, Plaintiff, 1 CIVIL ACTION NO. 2:10-ev-04307-CMR v. DOUGLAS H. SHULMAN, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF INTERNAL REVENUE, Defendant. DECLARATION OF JEROME M. MARCUS, ESQUIRE I, Jerome M. Marcus, declare as follows: i 2, 3. Tam counsel for Z STREET, the plaintiff in the above-captioned matter. Shortly after the Complaint in this case was filed, I leamed that another organization was 2 charitable exemption from tax under Section 501(c)(3) of the Intemal Revenue Code, and that this organization had been victimized by the same IRS policy as that at issue in this ease. | contacted an adviser to this organization and through that person I learned that the IRS had sent a letter to this organization asking about its views regarding Israel. Because of ‘the adviser’s concern that the IRS would take adverse action to the organization if it were known that the organization had publicly revealed the IRS's inquiry, the adviser was willing to speak with me only ifI agreed that I would retain the adviser’s name in confidence. For the same reason, the adviser also refused to reveal to me the identity of ly the the organization which was seeking the $01(¢)(3) certification, and accor adviser would not provide me with the first page of the letter the organization had received from the IRS, though the adviser was willing to provide me with the rest of the letter.Case 2:10-cv-04307-CMR Document 5-1 Filed 11/22/10 Page 2 of 6 4, The adviser did reveal to me that the organization was a Jewish religious organization that had no publicly stated positions regarding the State of Israel. 5. The pages of the letter which the adviser provided to me are attached hereto as Exhibit A. Tdeclare under penalty of perjury that the foregoing is true and correct. A. Jerome M. MarcusCase 2:10-cv-04307-CMR Document 5-1 Filed 11/22/10 Page 3 of 6 Exhibit ACase 2:10-cv-04307-CMR Document 5-1 Filed 11/22/10 Page 4 of 6 Page 2 Sincerely yours, S Miny, Srna Exenpt Organizations Specialist Enclosure: Information Requestadditional 1 Case 2:10-cv-04307-CMR Document 5-1 Filed 11/22/10 Page 5 of 6 Page 3 formation Requested: Please read the Penalties of Perjury statement on pagé 1 stove. thes, please sign and date below, indicating you agree to the Declaration. Name Bate Your most recent response to our letter dated February 9, 2010 was not signed by a board member under Penalties of Perjury. Please have an officer sign the following Penalties of Perjury statement regarding your response: under penalties of perjury, I declare that I have examined the information in response to the IRS letver dated February 5, 2010, including accompanying documents, and, to the best of my knowledge and belief, the information contains al] the relevant facts relating to the request for the information, and such facts are true, correct, end complete. exe Sate Does your organization support the existence of the land of Terael Describe your organization's religious belief syste toward the land of rsrael, Please refer to the enclosed nawetartar Your website hag an online Judaica store that sells merchandise associated with the Jewish religion and culture. Please refer to the enclosed webpage printout for example, and provide the following information regarding your online store: a. How will your organization obtain this merchandise? Will your organization manufacture the merchandise, purchase it from another organization, ar receive it by donation? ZE your organization is purchasing the merchandise, is your organization or its menbers related to the suppliex in any way? Please explain,Case 2:10-cv-04307-CMR Document 5-1 Filed 11/22/10 Page 6 of 6 Page 4 R@ merchandise determined? ww ware the sales prices of 4. Distinguish your online store for a fox-profit operation, Does your online stexe soli any books ox other media in which any of your keard monbers hold copyrights to? If so, plesse indicate which media, Ig the online store conducted for the ccnvenience of the members of your orgenization? How important is the online store xelated to the nature and extent of the exempt function you intend to serve? h, Is the online store maintained and operated by volunteer lebor? PLEASE DIRECT ALL CORRESPONDENCE REGARDING YOUR CASE TO: Ug Natl: street Address: Internal Revenue Service Internal Revenue Service Exanpt Organizations Exenpt Organizations P. 0. Box 2308 550 Main St, Federal Bldg. Cincinnati, On 45201 Cincinnati, oH 45202 AM: Tracy Dornette ACIN: Tracy Dornette Room 4504 Room 4504 Group 7830 Group 7830 Letter 1312 (Rev, 22/2007)EXHIBIT BIRS to Jewish group: ‘Does your organization support the existence of the land of Israel”. none Page 1 of 4 November 24, Categories: Mise IRS to Jewish group: ‘Does your organization support the existence of the land of Israel?" ‘A Pennsyivania Jewish group that has claimed the Internal Revenue Servis is targeting pro- Israel groups introduced in federal court today @ letter from an IRS agent to another, unnamed organization that tax experts said was likely outside the usual or appropriate scope of an IRS. inquiry. "Does your organization support the existence of the land of Israel?" IRS agent Tracy Dornette wrote the organization, according to this week's court filing, as part of its consideration of the organizations application for tax exempt status. “Describe your organization's religious belief sytem toward the land of Israel.” ‘The document emerged in the course of a lawsuit filed in August by Z Street, a hawkish group that casts itself as the Zionist answer to the liberal J Street. Z Street claims that a different IRS agent reviewing its application for tax exempt status said the agency is "carefully scrutinizing organizations that are in any way connected with Israel" and that "a special unit" is determining whether its activities "contradict the Administration's public policies. ‘The IRS can deny tax exempt status to groups that work against "established public policy," a ‘Adverisement Did you know... Nestlé employs more than 44,000 people in 47 states. Print Powered By Byr hhtp:/Awww.politico.com/blogs/bensmith/1110/IRS_to_Jewish_group_Does_your_organiza. amic 12/6/2010IRS to Jewish group: ‘Dees your organization support the existence of the land of Israel” POLITICO shared the correspondence with Z Street. Z Street does not know the name of the group and may subpoena the tax adviser, who is no longer cooperating with them, for more information, Marcus sai Several experts on non-profit tax law said the questions to the organization were unusual, at best, though they were also skeptical of the claim that the IRS is specifically targeting pro- Israel groups. “The claims go far beyond what should be the IRS's role," said Paul Caron a University of Cincinnati law professor and the author of TaxProf Blog. Ellen April, a law professor at Loyola University in Los Angeles said the second question was appropriate’ in the context of an application seeking a tax exemption on religious grounds. “The first one is not the way | would want any of my agents to do it” she said. Former LR.S. Commissioner Sheldon Cohen said he was skeptical of Z Street's motives in its high- profile lawsuit, rather than pursuing its concerns in tax court "They were hardly into the process when they screamed rape ~ nobody lifted the dress yet,” he said, noting that 501(c)3 groups can't advocate for political positions. But he called the specific questions "unusual." "Ive never seen that kind of inquiry," he said, Page 2 of 4 precedent established in its denial of a tax exemption to Bob Jones University over racial discrimination, and Z Street is suggesting that the IRS has begun applying some such policy to pro- israel groups. The State Department has complained of tax exempt contributions to groups that fund weapons and equipment for West Bank settles, which Z Street co-founder Lori Lowenthal Marcus said 2 Street has never come close to doing. "Given that we have fallen within this net, how big is the net?" she asked ‘The agent's question was contained in correspondence with "a Jewish religious organization’ with No stated position on Israel, Z Street says in its court filing. The group's tax adviser, Z Street says, ‘Adverlsement Did you know... Nestlé employs more than 44,000 people ina? states. Good Food, Good Life Print Powered By a 7 hitp://www-politico.com/blogs/bensmith/1110RS_to_Jewish_group_Does_your_organiza.... 12/6/2010IRS to Jewish group: 'Does your organization support the existence of the land of Israel?” POLITICO Page 3 of 4 misguided agent. ‘questions shot back at them more than once," he said, ‘The IRS has sought to dismiss Z Street's claim on technical grounds. A spokesman said he couldn't immediately comment on the new filing; in ‘August, @ spokesman said he couldn't comment ‘on an ongoing case. Posted by Ben Smith 02:35 Pa ‘And Ofer Lion, a California tax lawyer, said he thought the question was probably the work ofa “People who work in the field and have done a lot of these applications have seen these bizarre Z Street maintains, however, that the questions are more evidence of a broader policy targeting pro-Israel groups. The organization claims that the agency is “improperly considering the political viewpoint of applicants" and engaging in “clear viewpoint discrimination." ‘Advertisement Did you know... Nestlé employs mora than 44,000 people in 7 stan 7 2s NEStlé 3s Good Food, Good Life http://www politico.com/blogs/bensmith/ 1 10/IR | to_Jewish_group_Does_your_organiza.. Print Powered By 12/6/2010EXHIBIT _CO-cv-04307-CMR Document 1 Filed 08/25/10 Page 1 of 11 IN THE UNITED STATES DISTRICT COURT * por ‘THE EASTERN DISTRICT OF PENNSYLVANIA. Z STREET, Plaintiff, i 4 DOUGLAS H. SHULMAN, JN HIS OFFICIAL CAPACITY AS COMMISSIONER OF INTERNAL REVENUE. Defendant. COMPLAINT COMES NOW the Plaintiff, Z STREET, a pro-Israel Pennsylvania nonprofit organization, by its undersigned counsel, and alleges as follows: INTRODUCTION The plaintiif in this ease, Z STREET, is a nonprofit organization devoted to educating the public about the facts relating to the Middle East, and that relate to the existence of Israel as a Jewish State, and Israel's right to refuse to negotiate with, make concessions to, or appease terrorists. The case is brought because, through its corporate counsel, Z STREET was informed explicitly by an IRS Agent on July 19, 2010, that approval of Z STREET’s application for tax- exempt status has been ut least delayed, and may be denied because of a special IRS policy in place regarding organizations in any way connected with Israel, and further that the applications of many such Israel-related organizations have been assigned to “a special unit in the D.C. office to determine whether the organization's activities contradict the Administration's public policies.” ‘These statements by an IRS official that the 18S maintains special policies (hereinafter theCase 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 2 of 11 “israel Special Policy”) governing applications for tax-exempt status by organizations which deal with Israel, and which requires particularly intense scrutiny of such applications and an enhanced tisk of denial if' made by organizations which espouse or support positions inconsistent with the ‘Obama administration’s Israel policies, constitute an explicit admission of the crudest form of viewpoint discrimination, and one which is both totally un-American and flatly unconstitutional under the First Amendment. ZSTREET brings this case seeking a Declaratory Judgment that the Israel Special Policy violates the First Amendment to the United States Constitution; and for injunctive relief barring application of the Israel Special Policy to Z STREET’s application for tax-exempt status or to similar applications by any other organization; and to compel full publie disclosure regarding the origin, development, approval, substance and application of the Isracl Special Poliey. JURISDICTION AND VENUE |. This Court has jurisdiction over the subject matter of this Action by operation af 28 §1331 (federal question) and 28 U.S.C. §2201 2. Venue lies in this District by operation of 28 U.S.C. 1391(¢) inasmuch as a substantial part of the events or omissions giving rise to the claim occurred here, and inasmuch as the Plaintif? resides here. FACTS: 3. Z STREET filed in the Commonwealth of Pennsylvania for incorporation as a non-profit on November 24, 2009. 4, On December 29, 2009, Z STREET applied to the United States Internal Revenue Service for status as an organization recognized under Section 501{c)(3) of the InternalCase 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 3 of 11 Revenue Code (“the Code”), which status (also known as “tax-exempt” status) would allow those persons donating money to 7, STREET to deduct such donations from their taxable income, thereby diminishing the net after-tax cost of such donations to their donors, and so increasing the amount and number of such donations. Defendant the Commissioner of Internal Revenue is charged by Section 501(¢)(3) ofthe Code to grant tax-exempt status to those organizations that exclusively engage in charitable and educational activities. Section 501(c)(3) of the Code provides for the exemption from Federal income tax of “organizations organized and operated exclusively for religious, cheritable, scientific, literary, or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual. Section 1.501 (e)(3}-1(d)(2) of the Treasury Regulations (the “Regulations”) provides that the term “charitable” is used in Section 501(c)(3) of the Code in its generally accepted legal sense. In 7. STREET was incorporated exclusively for charitable and educational purpos« addition, its Articles of Incorporation specifically provide that, “No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to, its directors, officers, or other private persons, except that the corporation shalt be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of its exempt purposes.” Z STREET’s website, public awareness campaigns, and all other activities are educational. 7. STREET’s website and other educational materials provide a full and fair9 n, Case 2:10-cv-04307-CMR Document’ Filed 08/25/10 Page 4 of 11 exposition of the pertinent facts to permit an individual of the publie to form an independent opinion or conclusion. ZSTREET's positions are supported by research, original documents, facts, and opinions from recognized academic and other knowledgeable sources, which sources are provided in its materials and on its website, and therefore, Z STREET'S activities are educational and charitable in nature. Z STREET is therefore explicitly organized for charitable and educational purposes within the meaning of Section $01(c)(3) of the Code Regulation Section 1.501(¢3)-1(d)(2) provides that the term “charitable” includes “advancement of education,” and Section 1.501(c)(3)-1(4)(3)() of the Regulations defines “education” as: (a) the instruction or training of the individual for the purpose of improving or developing his capabilities; or (b) the instruction of the public on subjects, useful to the individual and beneficial to the community, The second example of Section ‘ions whose activities consist 1.501(€)(3)-1(€)(3)(i) of the Regulations refers to organi of presenting public discussion groups, forums, panels, lectures, or other similar programs as being educational. An organization engeged in the advocacy of controversial viewpoints or positions with the intent of molding public opinion or creating public sentiment does not preclude such organization from qualifying for tax-exemption under Section 501(¢)(3) of the Code, so Jong as the organization presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion. Treas, Reg. 1.501{c)(3)-1(d)(2); Revenue Procedure 86-43, 1986-2 CB 729.Case 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 5 of 11 12. In Revenue Procedure 86-43, 1986-2 C.B, 729, the IRS established a methodology test 10 determine whether an organization's advocacy activities are educational. Although the IRS will render no judgment as to the organization’s advocacy position, the IRS witl look to the method used by the organization to develop and present its views. fd. The method is not educational if it fails to provide: (a) a factual foundation for the viewpoint being advocated: ot (b) a developed presentation of the relevant facts that would materially aid a listener or reader in a learning process. In addition, the presence of any of the following factors in the presentations made by the organization is indicative that the method used by the organization to advocate its viewpoints is not educational: 4. 1. The presentation of viewpoints unsupported by facts is a significant portion of the organization's communicatior 2. The facts that purport to support the viewpoints are distorted; 3. The organization's presentations make substantial use of inflammatory and disparaging terms and express conclusions mare on the hasis of strong, emotional feelings than of objective evaluations; or “The approach used in the organization's presentations is not aimed at developing an understanding by the intended audience or readership because it does not consider their background or training in the subject matter. Moreover, IRS policy stipulates that there may be exceptional circumstances where an organization's advocacy may be educational even if one or more of the listed factors are present, PLR 199907021. In such case, the IRS will look to allCase 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 6 of 11 the facts and circumstances to determine whether an organization may be considered educational despite the presence of one or more of such factors. 13. In Private Letter Ruling 199907021, the IRS ruled that an organization which published newsletters to its members, produced a series of daily radio commentaries, and engaged in other educational activities about national and foreign policy issues was a charitable organization. The IRS concluded that the organization's activities were educational because the organization (1) included the opposition’s position; (2) supported its position with facts; and (3) cited independent sources that support the facts contained in the articles 14, In a letter dated May 15, 2010, IRS Agent Diane Gentry, to whom the 7. STREET file had been assigned, sent an IRS Letter 2382 requesting additional information to aid her in her review of Z STREHT's IRS Form 1023 (the "Application"). Z STREET, by its corporate counsel, submitted a response on June 17, 2010, providing all of the requested information, most of which had already been provided in Z STREEI"s initial application, including information about each of Z STREET's board members. In fact, detailed personal information about cach Z STREET board member had to be supplied to the IRS three times, a number in excess of the experiences of Z STREET board members for any other board an which they sit. 15. In an effort to learn the status of the application, and the reason for the delay in issuance of the requested 501(c)(3) certification, Z STRFET’s corporate counsel made follow up calls to IRS Agent Gentry of the IRS on July 7, and 14, 2010, which went unanswered. Counsel left a message in each instance, which was not returned.Case 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 7 of 11 16. On July 19, 2010, Z STREET’s corporate counsel called again, and this time spoke with IRS Agent Gentry who advised Z STREET’s counsel that she had two concerns regarding the Application: (1) the advocacy activities in general, and (2) the IRS's special concern about applications from organizations whose activities are related to Israel, and that are organizations whose positions contradict the US Administration's Israeli policy. 17. Furthermore Agent Gentry advised Z Street's counsel that she questioned whether 2, STREET activities were educational as described under Section 501(c)(3) of the Code, but instead might be lobbying, or that Z STRERT might be an “action organization,” which is the case when the only way to accomplish the purpose of the organization is, through legislation. In fact, none of Z STREET's purposes can be accomplished through legislative action. 18. IRS Agent Gentry also informed Z STRERT’s counsel that the IRS will look to the method used by the organization to develap and present its views. She stated further that the method is not educational if it fails to provide: (a) a factual fyundation for the viewpoint being udvocated; or (b) a developed presentation of the relevant tacts that would materially aid « listener or rewder in a learning process 19. To the extent that this concern is actually animating the IRS’s response to Z STREET'S application for 501(c)(3) status, it is baseless. Z STREET’s application provides eminent, fuctual, proof that the organization’s website, public awareness campaigns, and other activities are educational ones conducted in conjunction with advocacy. ‘The application makes clear and all the evidence supports that Z STREET does and will provide a full and fair exposition of the pertinent facts as to permit an individual or the public to formCase 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 8 of 11 an independent opinion or conclusion, and that Z STREET'S positions are and will be supported by research, original documents, facts, and opinions from recognized academic and other knowledgeable sources. 20, Further, in addition to its application for $01(c)(3) status, 7. STREET also applied for 501(h) status. which allows a tax-exempt organization to engage in lobbying, to the extent any is engaged in, by measuring the amount of money the organization spends on lobbying, and for an organization the size of Z STREET, that amount is 20% of the exempt purpose expenditures. Z STREET has not engayed in any lobbying activities no matter how defined, but had it done so, less than 20% of its total expenditures were spent ‘on lobbying. 21, Agent Gentry also informed Z STREET"s counsel that the IRS is carefully scrutinizing organizations that are in any way connected with Israel 22. Agent Gentry further stated to counsel lor Z SURELT: “these cases are being sent to & special unit in the D.C. office to determine whether the organization's uetivities contradict the Administration's public policies.” 23. Z STREET, and its President, Lori fowenthul Marcus, have publicly taken positions wn issues relating to Israel that are inconsistent with positions taken by the Obama administration. 24, The IRS's admissions by Agent Gentry make clear that the [RS maintains an Israel Special Policy governing the processing of applications for tax exemption by organizations which are believed to be operated by persons holding political views inconsistent with those espoused by the Obama administration, and that the Israel SpecialCase 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 9 of 11 Policy mandates that such applications be scrutinized differently and at greater length, and therefore that they take longer to process than those made by organizations without that characteristic, or even that the tax-exempt application might be denied altogether on that basis 25, Z STREET has been and continues to be injured in its business and property by the Israel Special Policy inasmuch as its application for tax-exempt status has been affected by the application of a clearly unconstitutional policy which has held up the granting of its 501{¢)(3) status, as admitted by the IRS agent in charge of reviewing and determining Z. STREET’s application. This delay has impaired and continues to impair Z STREET’s ability to raise funds and has thereby restricted the scope of its operation and its ability to speuk and to educate the public regarding the issues that are the focus and purpnse of 7 SIRE v ion for tux-exempt 26. As of the date of the filing of this Complaint, Z STRENT's appli status hus not been approved, 27. Organizations engaged in the same deyrce of political advocacy but which lake positions more closely aligned with the Obama administration's views and policies regarding Israel have been granted tax-exempt status and, on information and belief, such applications have been granted more quickly than Z STREET’s application and without the same delays or intensity of review.:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 10 of 11 Case COUNTI Pursuant to the Declaratory Judgment Act, 28 U.S.C. §2201, and the First Amendment To the United States Constitution 28, Plaintiff repeats and re-alleges paragraphs | through 27 as if fully set forth herein. 29, Limitation of the issuance of tax-exempt status to a nonprofit educational organization on the basis of the substantive views held by the persons who operate the organization constitutes a restriction on the freedom of speech of such persons, 30. The existence and application of the Israel Special Policy identified above constitutes blatant viewpoint discrimination in violation of the First Amendment to the United States Constitution, WHEREFORE, Plaintiff seeks a Declaration that Defendant's substance and application of smpt status constitutes discrimination the Israel Special Policy to any application for tax-ex among viewpoints and a violation of the Plaintiffs riphl to frecdam of speech as guaranteed by the First Amendment to the United States Constitution, Plaintiff further secks injunctive relief: ‘A. Barring application of the Special Policy to its pending application for tax-exempt status pursuant to §501(c)(3) of the Code; B. Requiring that Defendant adjudicate Plaintiff's zpplication for tax-exempt status expeditiously and fairly and without any consideration of whether the positionsCase 2:10-cv-04307-CMR Document 1 Filed 08/25/10 Page 11 of 11 espoused by the Plaintiff or its officers are or are not consistent or inconsistent with the policy positions taken by the Obama administration; Mandating complete disclosure to the public regarding the origin, development, approval, substance and application of the Special Policy Award to Plaintiff of its attorney's fees and costs pursuant 10 28 U.S.C. §2412; and Such other and further relief as the Court may deem proper, Jerome M. Mare Attorney LD, 50708 P.O, Box 182 Merion Station, PA 19066 Voice: 610 664 1184 Email; contact@ZSTREET.ORG ulEXHIBIT DLawsuit Accuses IRS of Screening Israel-Related Charities ~ Forward.com hnp://www. forward com/articles/130743/ 1of2 Forward.com Lawsuit Accuses IRS of Screening Israel-Related Charities By Josh Nathan-Kazis Pubished August 25, 2010, UPDATED: September 3, 4 p.m, ET A hawkish pro-Israel activist group has filed a lawsuit alleging that the Internal Revenue Service is impeding or denying applications for tax-exemat status from nonprofit organizations that oppose the Obama administration's Israel policies. But experts in nonprofit tax law say that the allegations seem far-fetched Ina complaint fled in federal court in Pennsylvania on August 26, the group, called Z Street, alleged that an IRS. ‘agent told an attorney for the organization that delays in the processing of its application for tax-exemption were due to the case receiving extra scrutiny over whether it would oppose administration policy on Israel AAs the Forward reported in January, some argue that the 1983 U.S. Supreme Court decision in the case of Bob Jones University v. United States couid be interpreted to deny nonproft status to organlzations that oppose established American foreign policy. The Bob Jones decision, which found that "an institution seeking tax-exempt status must... not be contrary to established public policy," was written to bar tax exempt groups from participating in racial discrimination. Legal experts were split on the question of whether longstanding foreign policy, such as America’s opposition to Jewish settlements in the West Bank, could fall within the realm of "public policy" as described in Bob Jones. All agreed, however, that the IRS had never used Bob Jones to deny tax-exempt status to nonprofits that oppose ‘American foreign policy. The Z Street lawsuit alleges that its application for tax-exempt status, which was filed last December, has been held up due to an IRS procedure specifically targeting groups opposing administration policy on Israel. According to Z Street's complaint, IRS agent Diane Gentry said that applications for tax-exempt status from nonprofits working on Israel-related issues "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.” A spokesperson for Z Street said that there was no recording of the conversation with Gentry and declined to provide notes from the exchange, citing its potential bearing on ongoing tigation, That conversation was purportedly held between Gentry and an attorney handing Z Street's application for exemption. That attorney is rot involved in the lawsuit, which was filed by another attorney, Jerome M. Marcus. Gentry did not respond to a request for comment In response to a request for comment fram the Forward, IRS spokesman Bruce Friedland wrote: “The IRS, by law, cannot comment on specific charities or even confirm whether a specific exemption request exists.” He continued: “When any organization applies for tax exempt status, itis the responsibilty of the IRS to ensure that the organization's funds will be used to accomplish charitable purposes.” Friedland declined to speak generally about the existence of a unit dedicated to screening the activities of 12/6/2010 4:52 PMLawsuit Accuses IRS of Sereening Israel-Related Charities ~ Ferward.com itp: www. forward comfarticles/130743 20f2 Istael-related applicants for tax exemptions. But a congressional staff member close to the issue called allegations of such a unit “utter nonsense." Friedland also declined to answer general questions about the IRS's interpretation of Bob Jones and whether it ‘could be used to deny exempt status to organizations that oppose elements of the foreign policy of the United States, ‘The allegations of a special IRS Israel unit aroused skepticism from experts. Sheldon 8, Cohen, a former IRS commissioner, said he doubted there was any such unit. “We'd know about it,” he said, "Revenue agents are rot bashful about talking about what they work on.... The U.S. government is a sieve. This is not top-secret stuff.” (Of the questions about the existence the special unit, Marcus, Z Street's counsel, said that he agreed that they were difficut to believe. “If the statement hadn't been made to us by the IRS, |, too, would be reluctant to believe it,” he said. “And while i's possible that the IRS agent misapprehended the government's policy, the likelihood that the agent was talking about something that does not exist at all seems to me (unlikely) Marcus continued, “Our case is designed to get to the bottom of what the IRS policy really is.” Other experts suggested that Z Street's application for tax exemption could have been forwarded to the central office in Washington, D.C. for other reasons. The internal Revenue Manual describes a broad set of reasons \why exemption applications could be automatically referred to agency's quality assurance department, including cases involving “terrorist countries, and cases where the IRS has received third-party contact requesting that the applicant be denied exemption.” Contact Josh Nathan-Kazis at nathankazis@forward.com or on Twitter @joshnatt eR Copyright © 2010, Forward Assaciation, Ine, All Rights Reserved. 12/6/2010 4:52 PMEXHIBIT EZ Street, cont'd - Ben Smith - POLITICO.com, POLITICO Page | of 3 August 27, 204 Categories: Middle East Z Street, cont'd Internal Revenue Service spokesman Bruce Friedland hasn't responded to my inquiries about the general questions raised about a pro-lsrael group's lawsuit against the IRS: Whether there's actually @ unit giving special scrutiny to groups | inked to the Middle East conflict, and whether their policy stands figure into that consideration in any way. ‘The Forward adds an interesting legal twist: As the Forward reported in January, some argue that the 1983 U.S. Supreme Court decision in the case of Bob Jones University v. United States could be interpreted to deny nonprofit status to organizations that oppose established American foreign policy. The Bob Jones decision, which found that “an institution seeking tax-exempt status must... not be contrary to established public policy,” was written to bar tax exempt groups from participating in racial discrimination.Legal experis were split on the question of longstanding foreign policy, such as America’s opposition to Jewish settlements in the West Bank, could fall within the realm of ‘public policy” as described in Bob Jones. All agreed, however, that the IRS had never used Bob Jones to deny tax-exempt status to nonprofits that ‘oppose American foreign policy. ‘There's quite a bit of skepticism that this could be implemented secretly, however. It would be ‘Advertisement Did you know... Nestié employs more than 44,000 people in 47 states. § Nestlé Good Lite ce Good Food, http://www politico.com/blogs/bensmith/0810/Z_ Street_contd. html Print Powered By 12/6/2010Z Street, cont'd - Ben Smith - POLITICO.com Page 2 of 3 POLITICO nice if the IRS responded to questions about it Incidentally, | heard the other day from a former officer of @ pro-Palestinian group, who said he'd been told years ago by the IRS that they had a similar special unit giving pro-Arab groups special scrutiny Posted by Ben Smith 01:25 PM ‘Advericement Did you know Nestlé employs more than 44,000 people in 47 states. Print Powered By | ol Dynamics http://www politico.com/blogs/bensmith/0810/Z_Street_contd.html 12/6/2010