In 2003 the Internal Revenue Service revoked VSP's tax exempt status citing exclusionary, members-only practices, and high compensation to executives.

The article claimed that VSP reported on its website that in 2002 revenues were $1.86 billion and that it provided eyecare coverage for one in eight persons living in the United States.

In 2005, a federal district judge in Sacramento, California found that VSP failed to prove that it was not organized for profit nor for the promotion of the greater social welfare, as is required of a 501(c)(4).

Instead, the district court found, VSP operates much like a for-profit (with, for example, its executives getting bonuses tied to net income) and primarily for the benefit of its own member/subscribers, not for some greater social good and, thereafter, concluded it was not entitled to tax-exempt status under 501(c)(4).

§501(c)(4) and asked for return of the 2003 tax payments and an order that the United States issue it a private letter recognizing VSP's 501(c)(4) status.

VSP argued that it qualified for exemption under 501(c)(4) because its operations were primarily for the promotion of social welfare through direct (contracted) services to broad segments of the community as well as through charity work.