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

For Immediate Release:

Contact: Susan Lerner

April 26, 2012


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

11 New York based corporate members of ALEC

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

ALEC is registered in New York 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 Attorney General Schneiderman today charges that ALEC is primarily a lobbying organization and may therefore be in violation of its tax exempt status. Common Cause NY 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 Yorkers 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 NY is calling on the Attorney General to review ALEC’s registration as a charity and whether its lobbying activities in New York are being properly disclosed,” said Susan, Lerner, Executive Director of Common Cause NY.

Common Cause NY’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 Relief and Health Care Act of 2006.

ALEC is an organization of nearly 2,000 state legislators, including a number of members of the New York State legislature, and more than 140 corporations including the following based in New York:

AOL, Inc

American Legal Finance

Bristol Meyers Squibb Company

General Electric Company

Kaplan Higher EDU

Pepsi Co (no longer a member as of 2012)

Pfizer Inc

Phillip Morris International

Reed Elsevier (no longer a member as of 2012)

Time Warner Cable

Verizon Communications

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. ALEC legislation introduced in New York includes S.281 (aka: Stand Your Ground) which has gained national attention in connection to the Trayvon Martin shooting in Florida.

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.