* Status allows contributions to be deducted from taxes
* ALEC says it is educational, complaint is frivolous
* Major corporations have been cutting ties with group
* Criticized for voter ID, "stand your ground" laws
By David Ingram and Nanette Byrnes
WASHINGTON, April 23 A conservative group that
promotes legislation in state capitals is mainly a lobbying
organization and should not benefit from a special tax status
meant for charities, a liberal group says in a complaint to the
U.S. Internal Revenue Service.
The complaint, released on Monday, challenges the tax-law
status of the American Legislative Exchange Council (ALEC) as a
not-for-profit 501(c)(3) charity. That status lets ALEC avoid
paying taxes and lets its supporters deduct their contributions.
Common Cause, a liberal group that has criticized ALEC for
other reasons, says in the IRS complaint that ALEC violates the
tax rules that prohibit charitable organizations from engaging
in a substantial amount of lobbying.
ALEC called the complaint frivolous and false. "The purpose
of the organization is not to lobby, and it tries assiduously to
avoid lobbying in compliance with the IRS regulations," said
ALEC's legal counsel Alan Dye on a conference call with
The complaint is the latest in a string of fights between
ALEC and liberal critics. Common Cause is part of a coalition
that wants corporations to drop their participation in ALEC
because of its support of voter-identification laws and "stand
your ground" self-defense laws like the one at issue in the
shooting death of 17-year-old Trayvon Martin in Florida.
After the criticisms began, corporations including The
Coca-Cola Co said they were cutting ties to ALEC, and
ALEC announced it would stop work on any legislation not related
to the economy.
On Monday, Procter & Gamble Co became the latest
corporation to confirm it is dropping its ALEC membership. A
spokesman said the decision followed a regular review, and that
the company dropped its membership in another not-for-profit,
the National Conference of State Legislatures.
ALEC serves as a meeting point for lobbyists, corporations
and mostly Republican state lawmakers, churning out model bills
on hundreds of topics.
Common Cause lawyer Eric Havian said it is not plausible for
ALEC to pose as a non-partisan, educational organization as the
IRS requires. "Anybody looking at these materials knows that's a
joke, and the IRS is not likely to find it humorous," said
Havian, of the law firm Phillips & Cohen.
Any organization may lobby, but lobbying is not tax
deductible and not-for-profits are generally permitted a very
small amount of lobbying, around 5 percent of spending, before
their status is jeopardized, Havian said.
Whistleblowers are entitled to a cut of any money recovered
by the government, but in this case Common Cause said it would
return any award to taxpayers.
An IRS spokesman declined to comment on the ALEC matter,
citing privacy laws.
The IRS has come under scrutiny for its examination of
501(c)(4) groups, which are also non-profits but can spend some
funds on some political advocacy.