The amended complaint is substantially similar to the original but attempts to strengthen TZAC’s legal position. It argues that NIF’s annual Form 990 filings with the Internal Revenue Service (IRS) falsely claim it had not engaged in partisan electioneering (which is prohibited for groups exempt under Sec. 501(c)(3) of the tax code) and that this in turn caused New York to grant it state exempt status. The amended complaint cites examples of activities and statements by groups that have received NIF funding but does not allege NIF’s grants were used to support these activities or explain how they constitute “electioneering” as defined by the IRS. In one case it alleges that calling a campaign message “racist” violates IRS rules.
NIF’s motion to dismiss argues that:
• TZAC’s complaint is based entirely on information in the public domain, so that it does not meet the requirement that a whistleblower filing a False Claims Act case provide previously undisclosed information or be an original source of publicly available information;
• New York State does not grant tax-exempt status based on IRS determination of 501(c)(3) charitable status, and
• TZAC fails to allege that NIF knowingly violated the IRS ban on partisan electioneering and:
o Does not claim that NIF funded the activities described in the complaint. NIF cites IRS Revenue Rulings that state 501(c)(3) organizations must retain control and discretion over use of funds they provide but are not otherwise responsible for all activities of their grantees.
o The motion notes the IRS rules defining prohibited partisan electioneering are not precise, and that “TZAC’s theory depends on several novel interpretations of Sec. 501(c)(3)’s broadly drawn and imprecise terms.” It provides examples of U.S.-based 501(c)(3) organizations that have conducted issue advocacy around the integrity of the electoral process that are similar to those NIF supported.
TZAC filed its Opposition to motion to dismiss, arguing that the New York State standard limiting suits based on publicly disclosed information is more lenient than the federal standard and repeated its arguments that NIF knowingly violated the ban on partisan electioneering by charities but did not allege any facts connecting partisan activities by NIF grantees to NIF grants. NIF replied, arguing that the IRS does not hold a grantmaker responsible for activities that it does not fund, and cited case law supporting its interpretation of the public disclosure rule.
NIF’s projects in Israel include strengthening civil society, combating racism, and protecting democratic channels for minorities. Its programs range from protecting Holocaust survivors to improving the socio-economic inclusion of Israeli Arabs and rural communities. NIF advocates for their key issues in Israel, and helps unite likeminded, progressive organizations to build an inclusive Israeli society.