On September 30, 2025, the U.S. District Court for the District of Columbia ruled that the standards the IRS applied in denying Freedom Path’s, a nonprofit organization, application for tax exemption under section 501(c)(4) as a “social welfare” organization “transgress the heightened vagueness standard applicable to civil regulations, including tax-exemption regulations, that affect speech covered by the First Amendment.”
At issue was whether the IRS standards used to determine 501(c)(4) tax eligibility are unconstitutionally vague. The court notably stated that there is a lack of a clear definition for how much political activity is permissible (the “Primary Activity inquiry”) as well as for what constitutes political campaign intervention (the “Political Activity inquiry”), noting that the ambiguous rules give the IRS too much discretion in its use of a “facts and circumstances” test and risks discriminatory enforcement against organizations based on their political views.
Although we must now wait for the IRS and Freedom Path to file renewed motions interpreting the Primary Activity inquiry and Political Activity inquiry that are “(a) not unconstitutionally vague and (b) appropriately rooted in the statutory and regulatory scheme, and constitutional principles, that govern this tax exemption in light of the [c]ourt’s findings,” this preliminary decision is viewed as a closely watched development for 501(c)(4) organizations and for how courts may assess the constitutionality of IRS standards governing political speech.
For more information, please find attached the full opinion of Freedom Path, Inc. v. IRS, Case No. 20-cv-1349-JMC (D.D.C. September 30, 2025).
At Supernova Law PLLC, we help nonprofits navigate complex challenges like those in the Freedom Path case. Whether it’s securing and maintaining tax-exempt status, structuring advocacy efforts, or staying compliant with ever-shifting IRS regulations, our mission is to provide clarity so you can stay focused on yours.
If you lead or advise a nonprofit and, let’s talk. Together, we can build strategies that protect your tax-exempt status while empowering your impact.
