Duane linked an earlier report on the travails of the pro-Israel lobbying group Z Street and the IRS in the Green Room, but now Politico has also picked it up as part of the expanding IRS scandal.  Unlike the Tea Party/conservative targeting where evidence shows a widespread effort to harass political opposition to the Obama administration, the Z Street story only involved one application …. at least at first.  Politico’s Josh Gerstein hints that there was a pattern here, too:

The same Internal Revenue Service office that singled out Tea Party groups for extra scrutiny also challenged Israel-related organizations, at least one of which filed suit over the agency’s handling of its application for tax-exempt status.

The trouble for the Israel-focused groups seems to have had different origins than that experienced by conservative groups, but at times the effort seems to have been equally ham-handed.

A leader of one of the organizations involved, Lori Lowenthal Marcus of Z Street, said Monday that she was convinced the added attention her group got was no accident.

The IRS initially responded to a lawsuit filed by Z Street that it was applying extra scrutiny to tax-exempt applications for groups ties to the Middle East because of the heightened risk of assisting terror-related groups.  For some reason, this included Israel, at least in this initial response:

“Israel is one of many Middle Eastern countries that have a ‘higher risk of terrorism,’” wrote Jon Waddell, manager of the IRS’s Exempt Organizations Determinations Group. “A referral to TAG is appropriate whenever an application mentions providing resources to organizations in a country with a higher risk of terrorism.”

However, Z Street and other groups reported getting unusual inquiries from the IRS. A Z Street lawyer was contacted by a Jewish religious group, which detailed inquiries from the IRS that the group’s leaders thought had treaded too far.

“Does your organization support the existence of the land of Israel? Describe your organization’s religious belief system towards the land of Israel,” the IRS asked in a letter sent to the religious group, which asked not to be named.

It’s possible that question was intended to screen out organizations opposed to Israel, and therefore at least theoretically more likely to be affiliated with terrorist groups.  But asking about religious beliefs as the basis of evaluating tax-exempt status would be a bridge too far, as would be predicating approval on only those political positions the IRS sees fit to endorse.  And we’re certainly seeing that in the main scandal, where the IRS targeted conservative groups on the basis of their politics.

Now, however, the IRS denies they told Z Street any of the above:

In court papers, the IRS denied that its personnel ever told Z Street that there was a special review for groups that might be at odds with Obama administration policy. The tax agency contended that the issue was whether the groups might violate “public policy” — a legal term of art for the notion that the government shouldn’t bestow a benefit on an individual or organization engaged in illegal activity like terrorism, or in an officially disfavored activity such as racial discrimination.

“The application was not transferred to TAG because of an ‘Israel special policy’ or because Z Street’s views on Israel contradict the Obama administration’s views on Israel,” the Justice Department wrote in a brief seeking dismissal of Z Street’s lawsuit.

Yes, and we should believe this, because, er … the IRS has been so honest about their actions so far.

It’s yet another evidence set showing that the IRS has become so politicized that it presents a grave threat to political speech and liberty.  Next question: how do we solve the problem?  Hint: Sensible campaign finance reform that eliminates artificial categories and limits for donations and instead requires full and immediate disclosure to parties and candidates would be a great start.

Update: Did the IRS also target pro-life groups for harassment?  I’d say that these kinds of questions will be popping up for the next few weeks.