That’s the ultimate question in the Z Street litigation; yesterday, the district court rejected some of the government’s preliminary procedural objections, and allowed the case to go forward (Z Street v. Koskinen (D.D.C. May 27, 2014)). Here’s a summary of the claim (some paragraph breaks added):
[The IRS] presses three arguments that the Court nevertheless lacks subject-matter jurisdiction over Plaintiff’s constitutional claim. Defendant maintains, first, that the Anti–Injunction Act precludes this Court from exercising jurisdiction; second, that the Court cannot grant the relief that Plaintiff requests under the Declaratory Judgment Act; and third, that the doctrine of sovereign immunity bars Plaintiff’s suit. Defendant further argues that Plaintiff has failed to state a claim upon which relief can be granted because Plaintiff has an adequate remedy at law, thereby foreclosing the equitable relief that Plaintiff seeks.Because this Court does not accept Defendant’s core contention that Z Street seeks a determination of whether or not it is entitled to Section 501(c)(3) tax status through this action — which underpins each of Defendant’s grounds for dismissal — the Court rejects Defendant’s assertions that the AIA, the DJA, or sovereign immunity bars Plaintiff’s request for equitable relief and that Plaintiff has an adequate remedy at law….Z Street alleges not that the IRS unlawfully denied it a preferred tax status, but only that the IRS subjected it to unconstitutional viewpoint discrimination in considering its application for that status. Thus, victory in this action would not provide an answer to the fundamental question of whether or not Z Street is entitled to Section 501(c)(3) status, and indeed, Z Street is not asking for any judicial determination to that effect. Rather, Z Street here seeks only to have its application — good or bad — be evaluated using the same standards are criteria that apply to other organizations that the IRS reviews.In this regard, looking at the requested remedy as the D.C. Circuit requires, Z Street’s complaint requests only two things: (1) a declaration that the Israel Special Policy violates the First Amendment, and (2) an injunction that requires disclosure of information regarding the Israel Special Policy, bars the IRS from subjecting Z Street’s application for Section 501(c)(3) status to the Israel Special Policy, and that mandates that Z Street’s application be adjudicated “fairly” and “expeditiously.” Neither the declaration nor the injunction, on their face, have direct implications for the assessment or collection of taxes — Z Street merely asks the Court to require the IRS to go about its usual business of evaluating Section 501(c)(3) applications in a manner that comports with the Constitution….[In an earlier case, t]he en banc D.C. Circuit drew a clear line between suits that themselves seek to enjoin the assessment and collection of taxes — which the AIA and DJA prohibit — and other actions that could be brought against the IRS for a different purpose and to a different effect. Defendant has essentially ignored this critical line-drawing determination by insisting that, despite the fact that Z Street’s action has neither the purpose nor the effect of restraining the agency’s tax-collecting function, the instant constitutional claim should nevertheless be characterized as a “pre-enforcement” tax collection matter within the sweep of the AIA. This contention is clearly out of step with how the AIA and DJA have long been interpreted in this jurisdiction….