In the case of Alexander, Commissioner of Internal Revenue v. 'Americans United' Inc., 1973, the U.S. Supreme Court ruled that a non-profit organization named Americans United for Separation of Church and State had violated its tax-exempt status by engaging in substantial lobbying activities. The court held that under Section 501(c)(3) of the Internal Revenue Code, organizations are prohibited from "substantial" lobbying as a condition to qualify for tax-exempt status. The IRS revoked Americans United's tax exemption after it found out about their extensive lobbying efforts against legislation related to parochial schools and religious institutions receiving federal aid. Despite arguments from Americans United that this was an infringement on their First Amendment rights, the court upheld the revocation stating that Congress has not infringed upon any First Amendment rights because it hasn't prevented these organizations from engaging in political activity but merely stipulated conditions for obtaining a certain financial benefit (tax exemption).

In the dissenting opinion for Alexander, Commissioner of Internal Revenue v. 'Americans United' Inc., Justice William O. Douglas argued that the majority's decision to revoke tax-exempt status from Americans United was a violation of First Amendment rights. He contended that by revoking this status based on lobbying activities, the IRS was effectively suppressing free speech and inhibiting political expression. Furthermore, he criticized the vagueness of "substantial part" in determining whether an organization's lobbying efforts were excessive or not under Section 501(c)(3) of the Internal Revenue Code. This lack of clarity could lead to arbitrary enforcement and potential abuse by those in power who might use it as a tool against organizations they disagree with politically or ideologically.