Common Cause New Mexico Calls on Attorney General to Investigate ALEC Compliance with State Tax and Lobbying Laws

On the heels of filing a whistleblower complaint with the IRS charging abuse of federal tax laws, Common Cause New Mexico today asked Attorney General Gary King to look into the tax status of the American Legislative Exchange Council (ALEC) in New Mexico.

ALEC is registered in New Mexico with the Attorney General’s Office as a charitable organization, and at the federal level, where it enjoys tax-exempt status under section 501 (c)(3) of the Internal Revenue Code. A letter sent to Attorney General King on Monday charges that ALEC is primarily a lobbying organization and may therefore be in violation of its tax exempt status. Common Cause New Mexico is calling on the Attorney General to review ALEC’s 990 form and investigate their activities to ensure that they are in compliance with state tax and lobbying laws.

“ALEC is a corporate lobby front group masquerading as a public charity on the taxpayers’ dime. New Mexicans shouldn’t have to subsidize ALEC’s agenda to limit voting rights, undermine our public schools, spread Stand Your Ground gun laws, and weaken laws protecting our environment. Tax fraud is illegal, which is why Common Cause New Mexico is calling on the Attorney General to review ALEC’s registration as a charity and whether its lobbying activities in New Mexico are being properly disclosed,” said Viki Harrison, Common Cause New Mexico Executive Director.

Common Cause New Mexico’s letter comes just days after the national organization of Common Cause filed a whistleblower complaint with the IRS on the grounds that ALEC is flouting federal tax laws by posing as a tax-exempt charity while spending millions of dollars to lobby for hundreds of bills each year in state legislatures across the country. The complaint was filed on Common Cause’s behalf, pro bono, by the prominent whistleblower law firm Phillips & Cohen LLP, under the Tax Whistleblower Act of 2006.

ALEC is an organization of nearly 2,000 state legislators, including a number of members of the New Mexico legislature, and more than 140 corporations. Corporate membership in ALEC ranges from $7,000 to $25,000 which is currently tax deductable under ALEC’s 501 (c) (3) status. ALEC also spends thousands on junkets and conferences to bring corporations and lawmakers together to propose and draft legislation.

The IRS classifies ALEC as a 501 (C)(3) organization, which means that it is tax exempt and that donations to it are tax deductible. The law limits lobbying by groups with that designation, specifying that “no substantial part” of their activity can be devoted to influencing legislation. ALEC has declared under oath in several tax returns that it does no lobbying. Evidence in the Common Cause filing shreds that claim; it includes several thousand pages of ALEC records, detailing extensive efforts to influence a wide range of state legislation.

Read the full complaint here

In recent weeks, ALEC has faced scrutiny for its role in the spreading “Stand Your Ground” laws like the one that for weeks shielded the killer of Florida teenager Trayvon Martin from prosecution. Since then, at least a dozen major companies, including McDonald’s, Wendy’s Kraft Foods, Mars Inc., and Coca-Cola, have abandoned ALEC.