ALEC is running a tax scam
Once upon a time, an American business that was part of a scheme to systematically and secretly lobby state legislators to win passage of laws tailored to fattening its profits at the expense of the public good would have been shunned by customers and marginalized in the marketplace.
Today, mega-companies like Walmart, Koch Industries, Pfizer, and State Farm Insurance are openly if quietly engaged in just such an effort. They call it the American Legislative Exchange Council, or ALEC, dress it up with rhetoric about their devotion to free speech and free markets, and whine like spoiled children when someone dares to tell the truth about what it’s up to.
For about a year now, Common Cause and other watchdog groups have been taking a hard look at ALEC. The more we’ve learned, the more unsettled we’ve become. And in recent days, I’m pleased to say, the press and public have been taking notice.
Today, Common Cause is announcing a whistleblower complaint against ALEC filed with the Internal Revenue Service. We are submitting several thousand pages of ALEC’s internal records that we believe demonstrate beyond debate that ALEC for years has evaded federal taxes by masquerading as a charity and that it has lied to the IRS and the American public about its activities.
We’re asking the IRS to end this charade, cancel ALEC’s tax exemption, collect years of unpaid taxes and “impose necessary penalties.”
The complaint includes ALEC memos, emails, “issue alerts,” “talking points” and draft press releases, along with legislation drafted by ALEC-member corporations and then passed through ALEC task forces, committees in which elected state legislators and corporate executives vote as equals. The lawmakers go home to introduce that legislation without disclosing its ALEC lineage and accept ALEC’s backroom coaching to guide it to passage.
ALEC’s “issue alerts” keep legislators up to date on the progress of ALEC-backed legislation, suggesting arguments that can be made in hearings and during floor debate. The “talking points” offer answers to questions lawmakers can expect to hear from reporters and their colleagues about specific ALEC bills and the organization.
“ALEC boasts about how frequently its bills are introduced in state legislatures to show its influence over the legislative process,” the complaint notes. In one annual scorecard, ALEC Executive Director Samuel Brunelli told corporate backers that with a success rate higher than 20 percent, “ALEC is a good investment. Nowhere else can you get a return that high.”
Up to now, most press and public attention has focused on ALEC support for legislation like theFlorida“Stand Your Ground” gun law at the center of the Trayvon Martin case and a slew of voter identification requirements that would turn hundreds of thousands of students, elderly, disabled and minority voters away from the polls.
Those bills, and ALEC’s other legislation, merit scrutiny; many are clearly crafted to protect business interests regardless of the cost to the public. As the New York Times reported Sunday, ALEC has even tried to keep states from penalizing contractors that attempt to defraud the taxpayers.
But Common Cause’s tax filing focuses on a less-noticed but perhaps more fundamental problem with ALEC – its attack on democratic values. ALEC practices stealth advocacy, investing millions of dollars to entertain and lobby elected officials at swank resorts; it writes bills for them, refines that legislation through task forces where its business members wield a veto power, then stays carefully in the background while shepherding the finished “model” bills to passage. Their mission accomplished, ALEC’s business members reward their legislative allies with campaign contributions – nearly $400 million from 2000-10 – to keep the party going.
ALEC does all this, and then has the audacity to call itself a charity and ask the rest of us to support its work with a tax exemption. That’s just wrong.
One final point — ALEC’s leaders have accused Common Cause and other ALEC critics of attacking free speech; they say we want to deny business a seat at the table where public policy is made.
Nonsense. Our entire effort has been and will remain focused on bringing ALEC into the open, so that EVERYONE can see and hear and evaluate its agenda, so that it will no longer be able to sweet talk our elected officials behind closed doors to work its will. The companies leaving ALEC have done so not because their speech was muzzled but because it was amplified.