After 15 months, the nonprofit pro-Israel Zionist Organization of America (ZOA) has regained its tax-exempt status.
The Internal Revenue Service (IRS) revoked the ZOA’s status in February 2012 after the group failed to file its required forms for three consecutive years, an act that drew wide attention because of its potential adverse effect on tax-deductible donations from donors. In a letter dated May 15, the IRS informed the group that its status has been reinstated.
“It had no impact on our work,” ZOA President Morton Klein said in an interview with The Journal on May 20. “We didn't get rid of employees or close down divisions. Obviously it was a strain and a discomfort that we were under this cloud, but in terms of our work it had no meaning.”
However, the ZOA did experience some turbulence related to the loss of its tax-exempt status. In September 2012, the organization’s National Vice Chairman Steve Goldberg called for Klein’s resignation; two months after that, the ZOA fired the Los Angeles-based executive director of its Western region, Orit Arfa (who is also an unpaid Jewish Journal blogger), after she complained in an internal memo that ZOA wasn’t doing enough to proactively inform donors about the loss of that status.
Goldberg said on May 20 that he is “relieved and gratified” at the reinstatement of ZOA’s tax-exempt status, but said further that he believes the organization still needs to find out why the forms were not filed.
“It cost the organization millions of dollars in donations and we have to make sure it never happens again,” Goldberg said. “But I am very glad that it’s back on firmer footing.”
During the period the ZOA was without tax-exempt status, donors were invited to give to another tax-exempt agency, which had agreed to hold onto the monies until the ZOA’s status was reinstated. ZOA raised more than $1 million in this manner, according to ZOA National Executive Director David Drimer.
Klein acknowledged that sum is less than the ZOA raised during a similar time period in previous years, but said that since the reinstatement of the group’s status, he has received pledges from donors saying they would resume giving to the organization. The ZOA also announced that it will hold a fundraising dinner in November.
“We have major people staying with us,” Klein said.
In firing Arfa, the ZOA also closed its Los Angeles office, and announced plans to open a new regional office in San Francisco. That office is not yet open, but Drimer said interviews for the position are ongoing.
According to Goldberg, Arfa has filed a lawsuit against Klein and the ZOA over the manner in which she was terminated.
The reinstatement of the ZOA’s 501(c)3 tax-exempt status comes at a time when news outlets are intensely covering the fallout over revelations that the IRS’s Cincinnati office targeted Tea Party and conservative groups applying for 501(c)4 status; the coincidence was not lost on Klein.
“People have asked me, because you’re a conservative, right-of-center, Zionist group, do you think that had anything to do with it?” Klein said.
“Whether that was a factor, I have no knowledge of that,” Klein said. “I’m just grateful we got reinstated.”