Thursday, August 14, 2014

Liberty Institute Client Testifies in IRS Lawsuit

Pro-Israel ministry deposed in lawsuit alleging First Amendment violation . . .

Recently, Liberty Institute client HaYovel, Inc., a Tennessee-based nonprofit dedicated to the support of small independent farmers in Israel, was subpoenaed to testify in a deposition for another pro-Israel organization, Z Street, an American non-profit dedicated to educating the public about Zionism.

Z Street alleges it was targeted by the IRS for its work in Israel.  When searching for a similar non-profit that has had difficulties with the IRS, Z Street chose to subpoena HaYovel to testify because in 2010 HaYovel was hit by the IRS with a “surprise audit” that also raised suspicion.  That audit came five months after the organization was featured prominently in a July 5, 2010 New York Times article titled, “Tax-Exempt Funds Aid Settlements in West Bank.”  It prompted HaYovel to hire Liberty Institute to investigate the matter.

“We’re pleased to have our client participate in the deposition for Z Street,” says Liberty Institute’s Senior Counsel Roger Byron.  “Like the audit of HaYovel, the circumstances surrounding the Z Street matter are suspicious and could indicate unlawful actions by the IRS.”


Z Street first filed a lawsuit against the IRS in 2009, alleging that the IRS violated the organization’s First Amendment rights by engaging in impermissible viewpoint discrimination against the organization.  It claims the IRS did so when it implemented an internal review policy that subjected Israel-related organizations applying for tax-exempt status for 501 (c)(3) organizations to more rigorous review procedures than other organizations applying for that same status.

Although filed five years ago, Z Street’s case still hasn’t been heard in court because the IRS has continually delayed the matter.  However, in May 2014, Judge Kentanje Brown Jackson rejected the IRS’s motion to dismiss the case, in which the IRS attempted to re-frame the lawsuit as one about tax liability, not key First Amendment rights.  Judge Jackson’s ruling allowed Z Street’s case to move into the discovery phase, and the plaintiff chose to subpoena HaYovel to testify about its surprise IRS audit in 2010.

As a result of the audit, Liberty Institute, in partnership with the Washington, D.C. law firm Bancroft PLLC, submitted Freedom of Information Act (FOIA) requests to the Internal Revenue Service, the Treasury Department and the State Department on behalf of HaYovel in February 2014.

The FOIA requests seek to determine whether there is a connection between the New York Times article, the current administration’s policies with regard to Israel’s settlements in the West Bank, and the audit of HaYovel in 2010.

“We are hopeful the investigation will not show that the IRS targeted HaYovel, a family-run organization that simply loves the people of Israel enough to assist its farmers,” adds Byron.


Z Street’s choice to include HaYovel’s testimony is a natural step in the progression of Z Street’s case.  Both HaYovel and Z Street are pro-Israel nonprofit organizations that have had unusual encounters with the IRS.  With the help of the testimony of HaYovel and other organizations experiencing similar problems, Z Street could accomplish much more than simply establishing government discrimination against its own organization.  Rather, it could build a larger case that the IRS targeted other pro-Israel organizations because of their disagreements with the administration’s policy on the Middle East.

If Z Street can demonstrate that the government unlawfully discriminated against it because of its pro-Israel viewpoint, the case could have profound implications for many non-profit organizations, including HaYovel.


Liberty Institute is committed to representing HaYovel in the investigation of its IRS audit, as well as representing HaYovel in its subpoenaed testimony in the Z Street lawsuit.  We believe it is important for the truth to be revealed for both organizations, as it will aid the thriving of religious liberty in the future.

We ask for your prayer as we continue to defend and restore religious liberty for clients like HaYovel. Your generous financial support is also necessary for our continued fight, and we appreciate any amount you feel led to give.

About Liberty Institute
Liberty Institute is a nonprofit legal group dedicated to defending and restoring religious liberty across America — in our schools, for our churches, in the military and throughout the public arena. Liberty’s vision is to reestablish religious liberty in accordance with the principles of our nation’s Founders. For information, visit