ALEC’s Corporate Sponsors Should Be Held Accountable For Forcing Taxpayers to Subsidize Their Lobbying

Posted on October 21, 2014

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Over the past few weeks, a parade of prominent corporations have cut or announced plans to cut their ties with the American Legislative Exchange Council (ALEC). The exodus started because of ALEC’s promotion of model legislation that denies climate change science. Google Chairman Eric Schmidt said on NPR that Google’s funding of ALEC was “part of a political game” that became a “mistake” for the company because “[t]hey’re just literally lying” about the “facts of climate change.”  

ALEC has problems with the truth in other areas as well.  A complaint pending in the IRS Whistleblower office, filed by Common Cause, used thousands of pages of ALEC’s own records to challenge the group’s claim that it does not engage in lobbying. If the tax agency finds that ALEC is a corporate lobby masquerading as a charity, and its corporate sponsors knew this all along, the businesses which contribute to its $7 million annual budget could be on the hook for back taxes, too. The complaint asks the agency to “disallow the tax deductions taken by ALEC’s for-profit corporate members, and collect taxes due from such [private sector] members.”

ALEC is organized as a 501(c)(3) nonprofit charitable organization, which means contributions to it are tax-deductible. In exchange, ALEC is supposed to operate so that no substantial part of its activities involves attempting to influence legislation.

But influencing legislation at the state-level is ALEC’s primary objective. A copy of ALEC’s own bylaws from its 2007 tax return state that its purpose is to “formulate legislative action programs” and “disseminate model legislation and promote the introduction of companion bills in Congress and state legislatures.” The complaint to the IRS included thousands of pages of documents detailing how ALEC uses tools of the lobbying trade to “promote” the introduction of bills, including sample press releases, talking points, “issue alerts” and emails from ALEC staffers to state legislators requesting status updates on pending legislation and offering assistance with ALEC bill introductions.

Of course, corporations are entitled to lobby Congress and state legislatures. But their activities should be disclosed and transparent, so voters can decide whether their officials are more responsive to special interests than to constituents.

Legislators are not always scrupulous in covering ALEC’s tracks. One Florida lawmaker was embarrassed in 2012 when she failed to substitute the state’s name for ALEC when introducing an ALEC bill.

Because corporate sponsorship is tax deductible, it appears that the American people are subsidizing extensive private interest influence over the state legislative process. It’s no wonder a former ALEC executive director bragged that with a “success rate at more than 20 percent [of introduced ALEC bills ultimately enacted into law during a two-year period], … ALEC is a good investment. Nowhere else can you get a return that high.”

Access, influence and favorable policy outcomes are precisely why corporations join ALEC. Confirming earlier this month that its membership has lapsed, Yelp’s public policy director tweeted that his company joined ALEC “to push a model … law and succeeded.” ALEC offers lobbyists an unparalleled opportunity to sit side-by-side with state legislators and draft, debate and vote – unseen by the press and public -- on model legislation that legislators ultimately take home to their statehouses and introduce as their own. Corporations even get the right to veto model bills they oppose. Sometimes the drafting sessions take place at four-star resorts, with legislators accepting ALEC “scholarships” to cover their flights, accommodations, and wining and dining.

ALEC operates as a conduit for corporations to advance their private interests at public expense. Yet it continues to represent itself to Uncle Sam for tax purposes as akin to the American Red Cross, with all the benefits and privileges thereto.

When the IRS evaluates the pending complaint about ALEC, it should not merely recover taxes from the organization. It should send ALEC’s corporate sponsors a message that it will not tolerate write-offs for private interest lobbying which, in effect, sticks taxpayers with the bill.

Office: Common Cause National

Issues: More Democracy Reforms

Tags: ALEC

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