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BREAKING NEWS FROM DK's Abolish ALEC Group (VLTP) - Reposted from VLTP.net

Earlier this year two complaints were filed against the American Legislative Exchange Council (ALEC) by Common Cause and Clergy Voice, alleging major violations of IRS Code lobbying prohibitions committed by ALEC, a “charity” which enjoys a 501(c)(3) tax exempt status with the IRS.

ALEC claims their activities are all related to educating lawmakers and that none are related to lobbying for or against legislation or a particular candidate.  Nearly all of their activities, however, appear to be directly related to creating thousands of pieces of model legislation and lobbying for passage of each one in most U.S. states.  ALEC openly boasts a success rate of 17% of “their” model legislation becoming law.

The first two complaints address issues of lobbying and soliciting contributions from corporations, businesses and other organizations.  The contributions are then used to reimburse ALEC state legislative members for their travel, lodging and incidental expenses related to attending any of ALEC’s three annual events (Summits or Meetings).  The money is requested by ALEC’s state chairmen and when received they forward the funds to ALEC to “hold” until an event is concluded.  Then state legislators submit requests for reimbursement for the costs of their attending, and ALEC disburses the held funds.

A third issue involves state lawmakers strategizing with corporate lobbyists or representatives at these annual meetings to develop proposed legislation in one or more of nine (9) ALEC task forces.  Once adopted by ALEC these model bills are sent back to states with ALEC members who are required by ALEC’s by-laws to ensure introduction of any legislation adopted by ALEC.

The Voters Legislative Transparency Project (VLTP), Inc. filed a third complaint and in it reports that it concurs with and supports the allegations put forth in both of the now pending complaints.

VLTP is a non-profit corporation registered in Indiana that advocates transparency in the creation and legislative processes used to enact state and federal laws.  Though this organization was just formed in the past year, most of VLTP’s staffers have been researching and tracking ALEC’s activities involving crafting model legislation and allegedly lobbying, for several years.

VLTP’s Executive Director, Bob Sloan, says in addition to the issues raised by the other complaints, there are  critical and undisclosed activities that explicitly violate IRS Codes but are not directly related to the organization’s “scholarship fund”.

“In our research  we acquired hundreds of documents from the public domain.  Some of the key materials used to substantiate our IRS complaint were obtained from ALEC’s website last year.  Our research team knew the Center for Media and Democracy and The Nation magazine were preparing to launch a joint expose with, CMD’s “ALEC Exposed” website.  We worked hard to gather everything we could from ALEC’s site before they discovered their model legislation was being made public and took steps to scrub or hide documents.

“ALEC documents collected included emails to members, state chairmen and corporate members; policy documents, proposed resolutions and copies of proposed model bills.  One of the policy documents sent out to individual task force members last year explained ALEC’s policies regarding reimbursement or payment for travel, lodging and incidental expenses.  This policy clearly shows ALEC has - and still is - paying public officials for travel and lodging.

”These payments are not paid out of the scholarship fund or with corporate money 'donated' specifically for such activities.  The expenses incurred by these public officials are directly reimbursed by the organization and do not go through the member's state chair or the Membership Director.  That these public officials are ALEC members does not exempt the organization from IRS prohibitions against making such payments - or elected officials from taking it.  To compound these violations the reimbursed expenses are for attending meetings where legislation is discussed, proposed and adopted with the intention that the model bills become law in the states those public officials represent.

"To VLTP this is clearly a form of lobbying.  ALEC pays the way for hundreds of lawmakers to attend a conference where lobbyists and corporate representatives are present, provides tutelage to both groups on issues important to the charity, the corporations and 'educates' the lawmakers on how to draft and prepare model bills intended to be used to change or create new laws in their home states.  Once the conference is over, ALEC provides these officials with tutorials, seminars and materials that support the proposed laws and in many instances sends a staff member or someone from their "Board of Scholars" to testify before committees or in hearings in support of the legislation that resulted from the conferences.

"We believe this is nothing less than 'Super' lobbying and the way it's being done is in violation of more than just the IRS Code related to non-profit corporate prohibitions against such activities.  ALEC is required to report these expenditures annually on their IRS 990 forms and it appears they've deliberately misled the IRS by not reporting payments made to elected officials.

The document referred to by Sloan is ALEC’s “Scholarship Policy By Meeting” which was distributed in June of 2011 by a task force Director.  This Policy statement provides:
VLTP’s complaint asserts this policy document clearly shows the charity itself reimburses task force members for expenses incurred to attend the ALEC Spring Summits.  These reimbursements are made directly to public officials serving as task force members from ALEC, after approval by the corporation’s Director of Policy.  The funds are not taken from the scholarship account and do not require the approval of the state chairman of the task force member’s state.

Only in instances where travel exceeds $350.00 or lodging is for longer than two days is the task force member told to apply for reimbursement through the state chair and the scholarship fund.

“All of ALEC’s public sector task force members are elected state lawmakers,” Sloan says.  “As such they are public officials receiving direct payments or reimbursements from a non-profit corporations and the IRS requires the non-profit to report such expenditures or benefits on annual IRS forms.

“In ALEC’s case we looked at the IRS 990 forms filed by ALEC from the early 2000’s through 2010 and found that the forms supplied by the IRS inquire about such expenditures or payments made to public officials.  In each filing we reviewed, ALEC left those lines blank or entered a $0.”

Sloan advises Part IX (Statement of Functional Expenses), question 18 of the 2010 IRS 990 form specifically required ALEC to “complete all lines” and required they give an amount for; “Payments of travel or entertainment expenses for any federal, state or local public officials.”  VLTP provided this document from their complaint exhibits demonstrating that on ALEC’s 2009 return (filed in 2010) the form documented $0 expenditures in such public official disbursements:

“We’ve long asserted ALEC is simply a highly paid lobbying organization used to funnel corporate money to public officials to encourage or reward them for legislative efforts carried out on behalf of those same corporations, Sloan said.

“ALEC has denied all such claims by publicly asserting all the funding used to reimburse public officials comes from corporate contributions solicited by ALEC’s fifty state chairmen.  ALEC claims they merely hold the money in a scholarship fund – and dispersals out of that fund are made upon member receipts provided to and approved by the state chairmen.

“The policy document provided by ALEC refutes that claim and by failing to report such expenditures to the IRS where required we believe they not only violated several IRS Codes, but opened themselves up to a criminal violation for deliberately committing tax fraud in Violation of §26 USC § 7206(1)(a).”

The VLTP complaint asserts paying for travel and lodging for state legislative task force members by ALEC and/or ALEC staff would count as a lobbying expenditures where such travel and lodging occurred in specific instances where potential legislation was to be developed, considered and/or adopted, Treasury Reg. §56.4911-2(b)(1)(ii) & 2(d)(I)(ii).

VLTP also complains that by ALEC providing “scholarships” to one hundred public officials to attend their States and Nations Summits – according to the policy document cited above – and not reporting those as expenditures upon their IRS returns, constitutes separate violations.  The policy of paying for attendance by public officials at ALEC’s numerous annual “Academies” would subject the organization to additional violations," Sloan said.

“At these events sometimes hundreds of people attend – including ALEC’s public sector members.  With ALEC paying $500.00 per person for travel and footing the bill for two days lodging and taxes, the organization is spending an incredible amount to place lawmakers in close proximity to lobbyists and corporate representatives.

“Again, by not properly reporting all of these payments to public officials to the IRS, ALEC has kept the IRS in the dark as to substantial acts of lobbying activities,” Sloan stated.  “Seems to us that the IRS asks specific questions in an effort of determining the extent of participation in lobbying a charity is involved in.

“By hiding millions of dollars in payments directly from the charity to public officials ALEC has succeeded in avoiding reporting these ongoing prohibited lobbying activities from the public, the media and more importantly the IRS.  Hopefully the claims made by Common Cause, Clergy Voice and VLTP will result in exposing these activities of lobbying and cause a review and revocation of ALEC’s tax exempt status.”

How this will play out regarding tax deductions taken by the corporations giving to ALEC and campaign reporting by legislative members is yet to be determined.  Sloan said he believes that many of the corporate and legislative members who have resigned or parted ways with ALEC, have had to consider their part or parts in the ALEC organization and expanding scandal.  No doubt, thoughts of how they and ALEC have been reporting expenditures had to have crossed their mind and possibly helped some make up their minds to abandon the floundering organization.

Some of the documentation acquired by journalist Beau Hodai was instrumental in providing VLTP with second sourcing and corroboration of the documents secured from the ALEC site.  Many of the exhibits presented by Common Cause and Clergy Voice also originated from those FOIA documents Hodai made public.

“We’re indebted to Mr. Hodai for his in-depth reporting on ALEC last year and his releasing of documents he received through public record requests.”

Originally posted to Bob Sloan on Tue Aug 28, 2012 at 03:42 PM PDT.

Also republished by American Legislative Transparency Project and Earthship Koch.

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