Posted by Brendan Fischer on July 15, 2011

Common Cause has asked the Internal Revenue Service (IRS) to investigate the American Legislative Exchange Council (ALEC) for possibly violating its tax-exempt status. The request came one day after the Center for Media and Democracy unveiled "ALEC Exposed," a website uncovering more than 800 model bills created by the corporate-funded organization.

Group Alleges Substantial Lobbying

As a non-profit registered under section 501(c)(3) of the tax code, "no substantial part" of the American Legislative Exchange Council's activities can be spent on "attempting to influence legislation," the practice otherwise known as lobbying.

As the Center for Media and Democracy has documented, ALEC corporations develop and approve "model legislation" at task force meetings, which are approved by the ALEC board for legislators to introduce in their state. According to Common Cause, "ALEC makes a practice not only of promulgating model bills as some sort of 'best practices' or publicly available reference source, but affirmatively and privately provides resources to those legislators promoting these bills. Under any definition, this is lobbying."

Even under measures of lobbying that focus on the amount spent influencing legislation, the letter states, ALEC also fails, because a significant amount of ALEC spending is on lobbying activities. Common Cause writes that ALEC's "largest program area in terms of expenditures is the operation of its task forces," whose primary function is to draft model bills "with the intent that they be introduced and passed in as many legislatures as possible." The next-largest area of expenditures is on ALEC meetings, at which "private sector" ALEC members (corporate representatives) advocate for specific legislation, bills which in many cases were created by ALEC and its corporate members.

"Member Communications" and Recruiting Legislators as Lobbyists

Common Cause draws a distinction between an organization contacting its members as "members" (for example, the NRA sending a newsletter to its card-holding-members about specific gun bills) and ALEC contacting its members in their capacity as "legislators," with the ability to actually introduce and pass legislation.

Even if ALEC's communications with its legislative members might not be considered "lobbying," the letter states, "when an ALEC member is urged to introduce one of ALEC's model bills, they are ipso facto being asked to communicate with other legislators regarding that specific legislative proposal – in other words, they are being asked to lobby." Also referenced is a 2009 email from Wisconsin Representative Leah Vukmir (R) to other legislators asking that they join an effort to oppose then-pending federal health reform legislation: in this instance, Vukmir was acting as a lobbyist for ALEC, contacting other legislators in an effort to influence legislation. (Vukmir, who is now a state senator, was named a 2009 ALEC "legislator of the year" and is currently co-chair of the ALEC "Health and Human Services" Task Force).

ALEC's efforts have been exceptionally successful: the organization boasts that "ALEC legislators introduce more than 1,000 pieces of legislation based on these models, approximately 17 percent of which are enacted." Common Cause notes that's ALEC's tax returns indicate its largest program area is its task forces.

Charitable?

In response to the complaint, ALEC spokesperson Reagan Weber told the Los Angeles Times "Legislators should hear from those the government intends to regulate."

Few would argue against that assertion: most would agree government officials should take business interests into account, along with the interests of their unincorporated human constituents. There is an expectation though, that business interests are balanced against the public interest.

For Common Cause, ALEC alters that balance, raising questions about whether ALEC meets the non-profit definition of a "charitable" organization. According to the organization's letter, ALEC "develops and promotes model bills in task forces where only private business interests and legislators participate; there seems to be no attempt to review considerations of public benefit or social good. The driving force is promotion of corporate business interests. This would be all well and good for a chamber of commerce, but it is not charitable."

The letter concludes:

By claiming to be a charity and calling participating legislators "members" ALEC attempts to evade disclosure of its lobbying, allows corporate members to deduct their payments as charitable contributions rather than non-deductible lobbying expenses, and does an end-run around state ethics laws intended to restrict the ability of businesses to buy access to legislators in order to promote their policy agendas. The IRS should stop allowing the continuation of this charade.

Individuals can sign-on to the Common Cause petition to the IRS here.

Brendan Fischer

Brendan Fischer is CMD's General Counsel. He graduated with honors from the University of Wisconsin Law School.