"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.
"I can't believe it was just about Z Street, because it's a tiny organization," Lowenthal Marcus said of the group, which has been critical of President Barack Obama for being too cozy with left-leaning Jewish groups like J Street and with pro-Palestinian entities.
(Also on POLITICO: 5 key players in IRS mess)
Z Street filed a lawsuit against the IRS in 2010 alleging that one of its attorneys were told its application for tax exemption was delayed and sent to a "special unit…to determine whether the organization's activities contradict the Administration's public policies."
The suit was filed in federal court in Pennsylvania and later transferred to DC. A judge in Washington has set a hearing on the case for July 2.
Z Street had applied for the 501 (c) (3) status applied to most charities, allowing for tax deductible donations.
Most of the tea party groups known to have come under scrutiny applied for 501 (c) (4) status, which allows advocacy groups to avoid federal taxes on their operations but doesn't render donations to the groups tax deductible.

Both kinds of applications are processed in the same Cincinnati office.

Legal filings show that the problems for Z Street — and apparently for other Israel-related groups — stemmed from an obscure unit in the Cincinnati IRS office: the "Touch and Go Group." One of the so-called TAG Group's duties was to weed out applications that might be coming from organizations which might be used to fund terrorism.
In response to Z Street's lawsuit, an IRS manager acknowledged that applications mentioning Israel were getting special attention.


Read more: http://www.politico.com/story/2013/05/israel-related-groups-also-pointed-to-irs-scrutiny-91298.html#ixzz2TNeBECrq