Common Cause Files Tax Complaint Against ALEC

When it rains, it pours… All over ALEC!

This submission is made pursuant to the whistleblower provisions of 26 U.S.C. 7623 et seq. (the “Tax Whistleblower Act”). This matter concerns the massive underreporting of lobbying by the American Legislative Exchange Council (“ALEC”). While ostensibly a nonprofit organization under Section 501(c)(3) of the Internal Revenue Code, ALEC’s primary purpose is to provide a vehicle for its corporate members to lobby state legislators and to deduct the costs of such efforts as charitable contributions. ALEC drafts “model” legislation provided by its corporate and legislative members, and lobbies for the adoption of that legislation. These goals are fundamentally inconsistent with ALEC’s claimed tax-exempt status as a charitable organization under 26 U.S.C. § 501(c)(3), because (i) “no substantial part” of a charity’s activity can be “attempting to influence legislation,” and (ii) ALEC’s activities do not qualify under any of the enumerated purposes of Section 501(c)(3).

How awesome… How totally awesome…  But wait, it gets better…

ALEC is a de facto organization of corporations, which have veto power over any ALEC legislation, and which pay enormous sums of money for the privilege of lobbying ALEC’s legislator-members (who pay nominal dues of $50 per year). ALEC spends its resources enabling its corporate members to communicate their desired legislative outcomes to state lawmakers, publicly brags that it “partner]s]” with legislators to pass the so-called “free enterprise” corporate-drafted bills into law, but disclaims in its IRS 501(c)(3) filings that it spends resources on attempting to influence legislation. ALEC is a corporate lobbying group masquerading as a public charity.

And then concludes

[E]ven if a tortured interpretation of the regulations led to the conclusion that ALEC is not engaged in lobbying, ALEC would fail to satisfy the most basic requirement for 501(c)(3) status – operations that are exclusively for charitable purposes . ALEC’s operations are neither charitable nor educational, much less exclusively so. They are pecuniary and political, and devoted to fostering the enactment of bills that will financially benefit and further the ideological goals of ALEC’s corporate membership.


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