Common Cause Calls on Attorney General DeWine to Investigate ALEC Compliance with State Tax, Lobbying Laws

On the heels of filing a whistleblower complaint with the IRS charging abuse of federal tax laws, Common Cause and the Center for Media and Democracy today asked Attorney General Mike DeWine to look into the tax status of the American Legislative Exchange Council (ALEC) in Ohio.

ALEC is registered in Ohio with the Attorney General's Office as a charitable organization; at the federal level, it enjoys tax-exempt status under section 501 (c)(3) of the Internal Revenue Code. A letter sent to Attorney General DeWine today charges that ALEC is primarily a lobbying organization and may therefore be in violation of its tax exempt status. Common Cause and the Center for Media and Democracy are calling on the Attorney General to review ALEC's 990 form and investigate its 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. Ohioans 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 is calling on the Attorney General to review ALEC's registration as a charity and whether its lobbying activities in Ohio are being properly disclosed," said Bob Edgar, President and CEO of Common Cause.

The Common Cause and Center for Media and Democracy letter comes several weeks after 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 Ohio legislature, and more than 140 corporations, including the following based in Ohio:

Wendy's (no longer a member as of 2012)

Orchid Cellmark

American Electric Power Company, Inc.

Corporate membership in ALEC costs $7,000 to $25,000. ALEC also spends thousands on junkets and conferences to bring corporations and lawmakers together to propose and draft legislation.

"On ALEC task forces, Ohio legislators and corporate lobbyists vote as equals behind closed doors on templates to change the law. Ohio legislators have traveled to ALEC meetings at luxury resorts, with all expenses paid by corporate-funded 'scholarships,' and without any meaningful disclosure to residents of the Buckeye state," said Lisa Graves, Executive Director of the Center for Media and Democracy and former Deputy Assistant Attorney General at the U.S. Department of Justice.

"Moreover, our investigation reveals that numerous Ohio lawmakers solicited thousands of dollars from corporate lobbyists for these so- called scholarships, and accepted gifts like tickets for themselves and their families to attend an exclusive outing at a Cincinnati Reds game, among other perks such as posh dinners, from ALEC corporations with bills and interests under consideration by the Ohio legislature. This is what corruption looks like, and so we join in the call for the Ohio Attorney General to investigate lobbying by ALEC and its operations."

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: www.CommonCause.org/IRSWhistleblower.

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 Proctor & Gamble, McDonald's, Wendy's, Kraft Foods, Mars Inc., and Coca-Cola, have abandoned ALEC.