In the Treasury inspector general's report out this week, there was no finding that 'pro-Israel' or 'Jewish' were classifications that were specifically targeted for political purposes. In other words, no evidence has thus far been discovered that an organization like Z Street would have been singled out because of its allegiance to Israel or because of specific Israeli government policies.
Malcolm Hoenlein, executive vice chairman of the Conference of Presidents of Major American Jewish Organizations, told The Jerusalem Post that he has neither seen nor heard of any evidence to the contrary, though he admits that, if a group represented by the conference were being audited, he might not be the first to know.
The Politico piece cites one sole source from the IRS whose comments indicate the possibility of a connection to the scandal: Jon Waddell, manager of the Exempt Organizations Determinations Group at the IRS.
"Israel is one of many Middle Eastern countries that have a ‘higher risk of terrorism,’” wrote Waddell concerning legal action from Z Street. “A referral to TAG is appropriate whenever an application mentions providing resources to organizations in a country with a higher risk of terrorism."
But a look at the IRS code on tax exemption procedures clarifies what Waddell means by 'higher risk of terrorism.' Procedure requires Waddell and his team take into account the activities of an organization that are deemed to put resources in danger; this includes activities or grants in foreign countries flagged by the State Department as having "trends" in terrorism. Those flags automatically prompt perfectly legal procedures, such as further questioning through further paperwork.
Whether Israel should still be on that list is a separate question. But whether the IRS was targeting pro-Israeli groups to investigate possible conservative ties is, at the moment, pure speculation.(Carl) If you follow these links you will see that there is a lot more evidence against the IRS than is cited in the JPost article excerpted above.