from the United States District Court for the Northern
District of Texas
WIENER, SOUTHWICK, and COSTA, Circuit Judges.
H. SOUTHWICK, CIRCUIT JUDGE
plaintiff claimed that an Internal Revenue Service test for
determining certain tax liabilities is facially
unconstitutional. The district court held it is not. We
conclude that the plaintiff does not have standing to bring
this facial challenge. Therefore, we VACATE the district
court's final judgment for lack of jurisdiction.
AND PROCEDURAL BACKGROUND On March 7, 2011, Freedom Path
applied for Section 501(c)(4) status under the Internal
Revenue Code, claiming it was in the category of
"organizations not organized for profit but operated
exclusively for the promotion of social welfare."
See 26 U.S.C. § 501(c)(4). A section 501(c)(4)
organization is exempted from income taxation. Id.
one year after receiving Freedom Path's application, the
Internal Revenue Service ("IRS") requested
additional information. Freedom Path responded. In February
2013, the IRS requested still more. Freedom Path provided
some information but generally rejected the requests because
the IRS allegedly leaked its tax returns to a news
organization. On September 30, 2013, after Freedom Path
declined to participate in an optional expedited review
process, the IRS sent Freedom Path a proposed denial of its
application for recognition as a social welfare organization
under Section 501(c)(4). That letter analyzed whether Freedom
Path operated "exclusively for the promotion of social
welfare," applied Revenue Ruling 2004-6, and determined
that it did not.
Path sued the IRS in the United States District Court for the
Northern District of Texas. It claimed the IRS was
identifying organizations such as itself that espoused
conservative political viewpoints, then making unreasonable
requests for information and otherwise delaying action on
their applications. In time, Freedom Path moved for a partial
summary judgment, seeking a declaratory judgment that the
test described in Revenue Ruling 2004-6 was facially
unconstitutional and chilled its First Amendment rights. The
district court denied the motion on July 7, 2017. Following
that decision, the parties stipulated that Freedom Path's
as-applied challenge to Revenue Ruling 2004-6 would be
dismissed without prejudice, potentially leaving that issue
for another day. Agreement was reached as to the other claims
in the case, leaving for the district court's
determination only the issue of the facial challenge.
district court entered a final judgment on November 28, 2017,
holding that the Revenue Ruling was not unconstitutional and
dismissing all other claims. Freedom Path filed a timely
initial question on this appeal, and ultimately the only one
needing an answer, concerns the plaintiff's standing to
bring a facial challenge to Revenue Ruling 2004-6. Rev. Rul.
2004-6, 2004-1 C.B. 328. We will explain the role of the
Revenue Ruling at issue, its supposed vagueness, and then
apply the relevant principles of standing for facial
Revenue Ruling's explicit purpose is to provide guidance
on the "tax implications of advocacy that meets the
definition of political campaign activity." Id.
It explains that Section 501(c)(4) organizations may be taxed
on funds expended "for an exempt function described in
[Section] 527(e)(2)" of the Internal Revenue Code.
Id. at 329. It further states that Section
"527(e)(2) includes all attempts to influence the
selection, nomination, election, or appointment of"
public officials. Id. The result is that if a
501(c)(4) organization expends funds for political campaign
activities, that expense is taxable under Section 527(f)(1).
See id. The latter provides that Section 501(c)(4)
organizations are taxed on either the organization's
total-exempt-function spending (for our purposes, political
campaign intervention) or its net investment income,
whichever is less. See 26 U.S.C. § 527(f)(1).
Thus, if a 501(c)(4) organization has no net investment
income, it has no tax burden under Section 527. Freedom Path
has no such income and no tax burden. At least from the
perspective of taxation, then, the plaintiff suffers no
injury no matter how the IRS labels its communications or
look at the clarity of the Revenue Ruling. To determine
whether "an advocacy communication on a public policy
issue is for an exempt function under [Section]
527(e)(2)," Revenue Ruling 2004-6 identifies 11 factors
for consideration. Rev. Rul. 2004-6, 2004-1 C.B. at 330.
"All the facts and circumstances must be
considered," the directive states, in addition to the 11
listed factors. Id. Freedom Path alleges that the
test is facially unconstitutional because its limitless
breadth of potential considerations makes it too vague to
give useful a priori guidance.
restate and elaborate on our earlier explanation of the
background of the case, the IRS's use of the Revenue
Ruling which has led to this lawsuit is explained in the
September 2013 IRS letter, proposing denying Freedom Path its
exemption as a Section 501(c)(4) organization. After
reviewing the facts, the proposed denial letter relies on the
following: Section 501(c)(4), a regulation, and finally five
Revenue Rulings. The penultimate one chronologically is the
one challenged here. The letter's application of Revenue
Ruling 2004-6 describes both the six factors favoring a
finding that an expenditure was for an exempt function and
the five which show that the expenditure was not. The letter
indicates the purpose of Revenue Ruling 2004-6 is "to
determine whether the organization described in each
[situation] has expended funds for a [Section] 527(e)(2)
exempt function as a result of an advocacy communication on a
public policy issue." The denial letter then uses that
guidance and the other authorities to conclude that Freedom
Path has not been "operated exclusively for the
promotion of social welfare within the meaning of [Section]
501(c)(4) and the regulations thereunder."
standing to pursue the facial claim that this Revenue Ruling
causes it injury, Freedom Path must show that it has suffered
an injury in fact, that the injury is fairly traceable to the
defendant's actions, and that the relief sought will
likely redress its injury. See Zimmerman v. City of
Austin, 881 F.3d 378, 388 (5th Cir. 2018). Even when a
plaintiff mounts a facial First Amendment challenge,