Friday, May 4, 2012


PENNSYLVANIA-On the heels of filing a whistleblower complaint with the IRS charging abuse of federal tax laws, Common Cause/PA today asked Attorney General Linda Kelly to look into the tax status of the American Legislative Exchange Council (ALEC) in Pennsylvania.

ALEC is registered in Pennsylvania with the Bureau of Charitable Organizations, and at the federal level, where it enjoys tax-exempt status under section 501 (c)(3) of the Internal Revenue Code. A letter delivered to Attorney General Kelly today charges that ALEC is primarily a lobbying organization and may therefore be in violation of its tax exempt status. Common Cause/PA 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. Pennsylvanians 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/PA is calling on the Attorney General to review ALEC’s registration as a charity and whether its lobbying activities in Pennsylvania are being properly disclosed,” said Common Cause/PA Executive Director, Barry Kauffman.

ALEC was also the beneficiary of a $50,000 Pennsylvania tax-payer subsidy to its 2007 convention in Philadelphia. The funds appear to have been used for food at a reception at the Philadelphia Marriott, including $3,600 for crab cakes, $3,000 for cheesecake lollipops, $4,000 for cheesesstakes, and much more. Questions have been raised as to whether Pennsylvania lawmakers “double-dipped”; taking ALEC scholarships and submitting for reimbursement from the state.

Common Cause/PA’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 Pennsylvania legislature, and more than 140 corporations including the following based in Pennsylvania – Crown Cork & Seal; Endo Pharmaceuticals; SAP America, Inc.; and TEVA Pharmaceuticals. Representatives Kate Harper, Sandra Major, Mark Mustio, Harry Readshaw, and Senator John Pippy have indicated that they have dropped their ALEC memberships.

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 model legislation introduced in Pennsylvania includes the onerous and expensive photo Voter ID law, and the dangerous Stand Your Ground law.

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.

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