The conservative corporate front group ALEC (American Legislative Exchange Council) is running into some trouble with a former IRS official. It seems that the former taxman has an issue with ALEC’s nonprofit status, based on documents and research from the Center for Media and Democracy (CMD), which manages PRWatch, ALECexposed, and SourceWatch.
“This month, a former leader of the Internal Revenue Service filed a complaint that the American Legislative Exchange Council (ALEC) has violated the terms of its nonprofit status by operating primarily for the private benefit of its corporate members,” said CMD. “The complaint, which also alleges that ALEC misrepresented itself in tax filings, raises additional allegations beyond those in earlier IRS complaints filed by Common Cause.”
ALEC “elevates commercial gain for a few over the well-being of society’s less fortunate” through “an agenda largely crafted by the organization’s corporate members,” the complaint states.
Marcus Owens, the former chief of the IRS’s nonprofit division, filed the complaint on behalf of Clergy VOICE, a group of Christian ministers in Ohio. “ALEC has deliberately and repeatedly failed to comply with some of the most fundamental federal tax requirements applicable to public charities,” the complaint says.
According to CMD, “Owens is a nationally recognized expert and leader on nonprofit tax law and a member of the noted law firm Caplin & Drysdale.”
CMD notes that ALEC is not in the business of serving the public good—as is required by law as a nonprofit entity—but the private benefit of its members and the politicians with whom it collaborates. ALEC is “afforded a variety of benefits by virtue of its ‘charity’ status — not least of which is giving corporations a tax deduction for paying ALEC membership dues — but in exchange for those benefits, ALEC is supposed to primarily serve public or charitable interests (rather than private interests) and engage in minimal lobbying.”
“ALEC is doing an extraordinary amount of lobbying, but reporting to the IRS they are doing NO lobbying,” Owens told CMD. “Even when North Dakota forced two of ALEC’s attorneys to register as lobbyists, they still reported [on their IRS filings] they did no lobbying. That is astounding.”
“I have never seen such a systematic and extensive operation . . . to sidestep disclosure and ethics rules in a way that really allows them to have an extraordinary impact,” Owens said.
Owens and Clergy VOICE’s complaint alleges that ALEC’s private not public benefit arises in “not only unprecedented access to state lawmakers — the very individuals who introduce and support the state laws that positively impact the corporations’ bottom lines — but also the opportunity to draft those laws.”
Would anyone be surprised to learn that most of ALEC’s legislative board and most legislative members are Republicans, and that the group benefits the GOP? No, not at all. Owens’ complaint covers that territory as well.
The complaint also alleges that ALEC’s “scholarships” (corporate money that pays for a politician’s flight, stay, meals, etc.) is essentially bribery. As CMD notes, “Although some legislators disclosed their personal receipt of “scholarships” on state disclosure forms, none reported the benefits to their families, which may also violate Ohio’s ethics laws.”
Whether the IRS will pursue Owens’ claim is another matter altogether. It’s certainly deserving of some federal attention, though.