New Allegations of Tax Code Violations by Exxon and ALEC Filed with IRS

Today, the Center for Media and Democracy and Common Cause provided new evidence to the Internal Revenue Service (IRS) showing that the American Legislative Exchange Council (ALEC) is falsely claiming tax-exempt status as a charity and that the ExxonMobil Corporation has intentionally misused the organization for nearly two decades to advance its legislative agenda. More than 240 exhibits in the filing detail how the oil giant has used ALEC to promote the company's climate denial policies and legislative agenda, in gross violation of the 501(c)(3) charitable status.

The filing demands an investigation into potential civil and criminal liability for both ALEC and Exxon, collection of fines and back taxes and revocation of ALEC's status as a tax-exempt charity.

"ALEC acts as a nonprofit lobbying concierge, with Exxon its eager patron," said Eric Havian, a partner at Constantine Cannon and a prominent whistleblower lawyer handling the case. "It is corrupt to use the tax laws as a cover for corporate lobbying, but it's even worse in this case. Exxon uses ALEC's charitable status to fuel its disinformation campaign on climate change, so taxpayers are literally paying Exxon to lie to them."

"It has become painfully obvious over the past few years to the press and the public that ALEC is corporate lobby front group masquerading as a charity--at taxpayer expense," said Arn Pearson, general counsel at the Center for Media and Democracy. "If the laws governing nonprofits are to mean anything, the IRS needs to take action to enforce them in this case."

"For years ALEC has been a key asset in Exxon's multi-billion dollar campaign to push a dangerous climate-denial agenda and secretly lobby politicians on anti-environmental legislation that pollutes the environment," said Karen Hobert Flynn, president of Common Cause. "It is time for the IRS tpo act and curb these blatant abuses."

This is the third supplement the groups have filed to the original 2012 claim against ALEC under the Tax Whistleblower Act alleging tax fraud and false claims to the IRS, but the first to raise issues of illegal activity by ALEC's corporate backers.

ALEC purports to spend zero dollars on lobbying when, in fact, promoting legislation on behalf of its corporate members is the group's primary purpose.

In the new filing, the Center for Media and Democracy and Common Cause provided the IRS Whistleblower Office with extensive evidence obtained by open records requests, original research, and public financial documents detailing intentional misuse of ALEC by the Exxon to advance legislation of direct benefit to the company.

For most of the past two decades, Exxon has used ALEC as a key asset in its explicit campaign, spelled out in an industry strategy memo, to sow uncertainty about climate science, undermine international climate treaties, and block any legislation that would impose emission reductions. Exxon has also used ALEC to advance its legislative goals concerning cap-and-trade policies, fracking, the Keystone Pipeline, and the Obama Administration's Clean Power Plan.

Over a 17-year period, the corporation and its foundation poured more than $1.7 million into ALEC's operations in order to finance lobbying activity by ALEC on legislation and public policies that interest and benefit the corporation, while improperly and illegally claiming a tax deduction for those expenditures.

Exxon's collusion with ALEC resulted in the coordinated introduction of scores of bills in state houses across the country, the progress of which ALEC promoted and carefully tracked. ALEC boasted of its efforts to win passage of that legislation in press releases and statements to its members.

For most, if not all, of that period, Exxon paid substantial sums to serve in a leadership capacity at ALEC, both on the group's corporate board and on energy-related issue task forces, where corporations promote "model" legislation for legislative members to take back home. In that capacity, Exxon and other fossil fuel companies held de facto veto power over what bills would or would not be promoted by ALEC.

That activity constitutes a gross violation of federal tax laws by Exxon in its own right, and further reinforces the case against ALEC for abuse of its 501(c)(3) charitable status.

In a cover letter to the filing, the Center for Media and Democracy and Common Cause urged Commissioner Koskinen to expedite the Whistleblower Office's open and active investigation into potential civil and criminal liability for both ALEC and Exxon, revoke ALEC's 501(c)(3) status, impose any necessary civil and criminal penalties, and collect unpaid back and present taxes for nondeductible lobbying activities from both ALEC and its corporate donors.

To read the IRS filing, click here.

To read the cover letter, click here.

To read previous filings, click here.