Common Cause IRS complaint challenges ALEC’s tax-exempt status
Common Cause has filed a whistleblower complaint with the Internal Revenue Service challenging the American Legislative Exchange Council's tax-exempt status.
"ALEC is a corporate lobby front group masquerading as a public charity," said Common Cause president Bob Edgar.
ALEC is an organization based on conservative principles that brings together state legislators and corporate representatives to draft model legislation on subjects ranging from tort law to climate change. Lawmakers pay a nominal fee to join while companies pay thousands. While membership is open to lawmakers from all parties, most members are conservative.
Common Cause, a liberal group, contends that ALEC's primary purpose is lobbying. Non-profits organized similarly to ALEC under the tax code are allowed to lobby so long as it does not constitute most of the group's activity.
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ALEC lawyer Alan Dye says the organization doesn't lobby and the complaint has no merit.
Common Cause argues that documents acquired through state-level data requests and an anonymous source conflict with Dye's account.
Those documents include legislation-specific talking points drafted by ALEC and circulated among state lawmakers, scorecards to track the progress of specific legislation, and model press releases.
"When you do those sorts of things, that's the definition of lobbying," said Eric Havian, who is representing Common Cause in its complaint. His firm, Phillips & Cohen LLP, routinely represents whistleblowers.
Dye says the complaint is a partisan attack.
The complaints "ignore a lot of the law that's applicable here, distort some of the other law that they do talk about, and are seemingly to me non-objective," Dye said. "They're screeds. They're not really legal documents."
Dye says ALEC abides by legal lobbying limits, but that the organization otherwise free to communicate in ways that are not covered by those definitions, principally disseminating non-partisan research and analysis.
"Everything ALEC does is intended to take into account all points of view, and to result in a complete analysis, and is all based upon non-partisan research and analysis,"Dye said.
Havian said that ALEC's corporate members are violating the tax code, too. If a someone representing a business has lunch with a legislator, it's a lobbying expense and therefore not tax deductible, Havian explained. That exact same meeting can happen at one of ALEC's conference, but the company can write off the expense of travel, dues, and membership because ALEC bills itself as an educational organization.
Havian said it could take the IRS years to investigate the Common Cause complaint.
ALEC has traditionally kept its membership and work close, but it's been getting wide media attention in recent weeks after more than a dozen companies including Coke, Wendy's, McDonalds, and Kraft Foods, decided to discontinue their ALEC membership. Those companies have been singled out by ColorOfChange, an organization that has linked ALEC's support for a bill that would expand the use of deadly force with the death of Florida teenager Trayvon Martin.
ALEC announced last week that it would end the task force key in proliferating that legislation as well as bills that would require photo identification at the polls.
Minnesota-based Xcel Energy has confirmed that it has an ALEC membership, but that it only focuses on energy-related issues.
UnitedHealth Group is reportedly a member as well.
Other major Minnesota corporations, including 3M, Cargill and Target, say they are not.