The agency’s ‘facts and circumstances’ test makes it all too easy for those in power to censor speech they deem unacceptable.
Vague guidelines for reviewing political speech, which had allowed the Internal Revenue Service to censor conservative groups a decade ago, are still on the books. Now, a lawsuit is challenging those guidelines as a threat to constitutionally protected speech.
“This case is about depoliticizing the IRS with clear standards that protect everyone — conservative, liberal, or anything in between,” Scott Keller, a partner at the national litigation firm Lehotsky Keller Cohn, told National Review.
In a case that originated five years ago, a Texas nonprofit is challenging the constitutionality of the IRS multifactor “facts and circumstances” test, which is used under certain circumstances to determine whether a social advocacy group is eligible for tax-exempt status as a 501(c)(4) organization. A motions hearing related to the case was held before Judge Jia M. Cobb on July 2, and a ruling is expected within 60 days.
The IRS uses the “facts and circumstances” test to evaluate whether advocacy communication constitutes constitutionally protected issue advocacy or political campaign intervention. The test is openly subjective and has not been changed since the Lois Lerner scandal in 2013, when the IRS admitted to showing bias against conservative political groups that apply for tax-exempt status. Lerner, then the acting director of the Exempt Organizations Unit at the IRS, apologized at an American Bar Association meeting for the agency’s inappropriate targeting of conservative groups and stepped down from her position shortly afterward.
A report by the Treasury inspector general for tax administration found at the time that Lerner and her division had subjected conservative 501(c)(4) applicants to heightened scrutiny resulting in extended delays. Meanwhile, the majority of left-leaning applicants won approval.
The nonprofit Freedom Path, for example, was established in 2011 with a focus on repealing Obamacare and the balanced-budget amendment, and the organization sponsored several commercials advocating its policy positions. When Freedom Path filed for tax-exempt status, the IRS demanded its donor list — a move later determined unnecessary by the inspector general. In 2020, the IRS denied the organization 501(c)(4) status for being too political, and the organization immediately filed a lawsuit.
“This isn’t just about one organization — this is about whether unelected bureaucrats can use tax law to silence political speech they don’t like. Every conservative group in America should be paying attention,” said Chris Gober, CEO of the law firm Lex Politica, who argued on behalf of Freedom Path in the hearing. “We’re asking the courts to do what Congress hasn’t: force the IRS to follow clear, constitutional rules instead of the ‘we know it when we see it’ standard that invites abuse.”
The U.S. Supreme Court struck down the same type of vague multifactor test in Citizens United v. FEC (2010), when it was used by the Federal Election Commission in election law, Gober argues. The IRS itself publicly acknowledged in a 2013 report that the facts and circumstances test has “created considerable confusion for both the public and the IRS.”
Greg Gonzalez, legislative counsel at the Foundation for Individual Rights and Expression, said IRS investigations and determinations concerning the expression of nonprofit organizations are often arbitrary and opaque.
“History has shown the government has targeted non-profit groups for certain kinds of speech or other expressive activity while seemingly allowing other groups that engage in similar activities to escape scrutiny,” Gonzalez said in a statement shared with National Review. “Poorly defined IRS standards can allow any administration, Republican or Democrat, to target groups they oppose by dangling the loss of tax-exempt status over their heads unless they sit down and shut up.”
Lerner may not be at the IRS anymore, but the problem remains: Subjective standards for constitutionally protected speech make it all too easy for those in power to censor speech they deem unacceptable.