Not-For-Profit’s Suit Challenging Tax Exemption Test Advances

A dispute over the 11-point test used to determine whether a not-for-profit organization merits tax-exempt status will continue following a ruling by a federal judge.

Texas 501(c)(4) Freedom Path Inc. sued in 2020 challenging the test established in Revenue Rule 2004-6 that the IRS used to deny it tax-exempt status, claiming the rules were unconstitutionally vague, and that they would have qualified for the exemption under a proper standard. Using those rules, the IRS measured level of political activity, societal aims, and objectives of Freedom Path’s business model to deny it tax-exempt status shortly after its 2011 founding.

Judge Jia ...