Court Finds IRS Standards for 501(c)(4) Political Activity Unconstitutionally Vague

On Sept. 30, 2025, the U.S. District Court for the District of Columbia issued an opinion in Freedom Path, Inc. v. Internal Revenue Service, holding that the Internal Revenue Services’ (IRS) standards for determining whether a 501(c)(4) organization has engaged in excessive political campaign activity are unconstitutionally vague.

A 501(c)(4) organization is a type of nonprofit recognized by the IRS under Section 501(c)(4) of the Internal Revenue Code. It must be operated “exclusively for the promotion of social welfare,” but may also engage in political campaign activity—so long as that activity is not the organization’s primary purpose.

The question of how much political campaign activity a 501(c)(4) may engage in has long been unsettled. The IRS has never issued regulations or definitive guidance on what constitutes a “primary” activity or how it should be measured. Is it more than 49% of the organization’s overall activity? Spending? Time? The answer remains unclear—even to the IRS. As the court noted:“Here, Freedom Path does not know how much political campaign intervention is too much, and the IRS cannot even agree with itself on the answer.”

Further complicating matters, the IRS uses a vague “facts and circumstances” test that includes a non-exhaustive list of 11 factors that may indicate when an advocacy communication on a public policy issue crosses the line into prohibited political campaign intervention, and six hypothetical scenarios illustrating how the factors are applied.

Taken together, the court concluded that the IRS’ standards for both how much political activity is permissible and what constitutes political activity are unconstitutionally vague. The court partially granted Freedom Path’s motion for summary judgment but did not grant tax-exempt status outright, as neither party proposed a constitutionally sound alternative standard.

A congressional appropriations rider currently prohibits the IRS from issuing new rules for 501(c)(4) organizations. As a result, the court ordered both parties to submit new motions proposing standards that are not unconstitutionally vague and are grounded in existing statutory and regulatory frameworks.

This is a federal district court decision that applies only to the parties in this case and is likely to be appealed.  Clients should continue to follow their current compliance practices pending further developments.  We will continue to monitor developments and provide updates as the case progresses.  If you are interested in learning more about how section 501(c)(4) organizations operate, please contact the authors listed below.

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING A COURT RULING ON THE POLITICAL ACTIVITIES OF 501(C)(4)S. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.