Victor Suthammanont wrote an article for Bloomberg Law titled “Supreme Court Case Offers Good Defense Against Trump IRS Audits.”
Victor’s article proposes a more aggressive defense strategy for tax-exempt entities in light of the current enforcement environment for nonprofits targeted by the government investigators for activities that are usually protected by the First Amendment. As partners Karen Kelly and Melissa Wiley explained in their recent article for Bloomberg Law, the president’s September 2025 memorandum ordering the IRS to switch to criminal tax investigations for certain tax-exempt organizations may result in deleterious impacts beyond the revocation of tax-exempt status. Victor notes that individuals and tax-exempt organizations also may be subject to civil enforcement investigations (both by the IRS and other government agencies) in addition to these, despite their conduct having First Amendment protection.
For those nonprofits targeted for a civil enforcement investigation, Victor proposes that, rather than "hunkering down" and arguing that there are no violations of the law, the targets of civil investigations can go on the offensive and seek an injunction to enjoin the investigation in light of the 2023 Supreme Court decision Axon Enterprises Inc. v. FTC.
In Axon, two parties, Axon Enterprises and Michelle Cochran, brought federal suits alleging that FTC and SEC proceedings violated their constitutional rights. Typically, challenges to administrative proceedings are subject to “statutory review” provisions, meaning challenges can only come after the proceedings are complete. Axon Enterprises and Cochran, however, challenged the constitutionality of both agencies’ enforcement structure at the beginning of the administrative proceedings and sought to enjoin them.
Victor provides a thorough analysis of the three factors in the 1994 decision Thunder Basin Coal Co. v. Reich that helped decide Axon. Ultimately, the Supreme Court in Axon found that injury in that case was impossible to remedy at the conclusion of agency proceedings because, if they were unconstitutional, they would have already been subjected to these proceedings irrespective of the outcome. Victor concludes that, as practitioners consider defense strategies for their tax-exempt clients, they may look to Axon in challenging examinations and in cases involving executive branch overreach, even at the investigation phase.
You can learn more about using Axon in a civil-investigation defense strategy by reading the complete article here.
About Victor
Victor served for a decade as a securities enforcement attorney in the U.S. Securities and Exchange Commission, including as a Senior Trial Counsel and as the Enforcement Counsel to Chair Gary Gensler. Prior to his extensive experience in the SEC’s Division of Enforcement, Victor represented and advised clients in private practice in complex commercial disputes and litigations, as well as in internal and governmental investigations.