The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Friday, April 27, 2012

Common Cause: IRS Whistleblower Letter on ALEC







Money in Politics?


The following information is most gleeful for me.  I have joined many in writing about ALEC and its influence on legislative. The root cause of ALEC's demise is its conservative mission and goals, and how those goals were accomplished via many US corporations.  At the root of ALEC is plain and simple: money!  As ALEC becomes an entity of the closet, I will admit to amazement the number of great US corporations (even progressive corporations) who have paid membership dues, and quite probably contributed money to ALEC.  The thought of the extent to which these corporations funneled money to willing hands and wallets in states government officials, is met with dread and loathing. One can only hope the same is not the case with federal legislatures, although I have strong suspicions contrary to my hope.


Have you ever wondered why a person would seek to spend, or actually spend millions to secure public office?  The higher the office the higher the level of spending from candidates and their supporters. Money is funneled to candidates in many ways, the most effective manner of funneling is via lobbyist. Simple handing cash to legislators is a complicated process and carries the real prospect of prison sentences. The process actually involves far more intricacy and structure.  As is the case with all matters involving people, some earn their 'off-to-the-side" undercover money in ways that violate criminal law.  Former Governor of Illinois, Blagojevich (D), is the perfect example of a politicians who attempted to make money via political advantage (via his governorship and opportunity sell a vacant Senate seat.)  Illegal  payments to public officials cuts across party-lines and is probably the most bi-partisan acts in Washington DC.  Republicans, Democrats and very possibly Independents in Congress have opportunity for, let's call it, "campaign contributions".  Surely no politician would take lobbyist money and pocket the cash! (I felt compelled to say that).


Most politicians are not as crass and guttural as  Blagojevich and the Tom DeLay (R) Texas. Most reap the benefits of lobbyist money via far more sophisticated and difficult to monitor and track means.  The American Legislative Exchange Council, ALEC,  was apparently the 'mother-lode' of money funneling to legislators. 


As stated previously, many have written about ALEC. There are many such articles on this web page via the Search Box above right. ALEC also drew attention for powerful groups with wherewithal to do it great harm via exposing the conservative organization's inner workings. My first exposure to ALEC came about due to my reading about the ultra conservative Koch Brothers.  Progressive organisations like Color of Change and now via the legal process, Common Cause, have sunk probing eyes into ALEC. Probing eyes focused on ALEC could not help, but yield major corporate 1%(er) legislative privilege. Legislative privilege for corporations associates with an accompanying lack of privilege for the nation's middle class and lower income citizens.  Despite Mitt Romney's robotic affinity for the beloved corporation and his claim of corporations are people "my friends',  ALEC's inner workings level his remarks to that of 'pure B/S.  



Open Secrets Dot Org on ALEC (September, 2011)
Open Secrets, which investigates money in politics, calls ALEC an “ideologically conservative consortium of state legislators and business interests known to draft model legislation for state lawmakers across the country.” According to Open Secrets, ALEC’s 23 corporate board members have spent at least $400 million on lobbying expenditures from 2009 through 2011.
Color of Change has been very successful at inducing a stampede of corporations away from ALEC. The Color of Change success may have been exacerbated by the recent killing of Trayvon Martin in Sanford, Florida: ALEC/NRA backed legislation signed by former Governor Bush (Jeb).


As of April 17, 2012, 10 to 12 corporations have fled ALEC. United Republic Dot Org's Suzanne Merkelson 
ALEC is responsible for pushing harmful laws like Stand Your Ground and disenfranchising voter ID requirements in states across the country. And it’s funded almost entirely by corporations. But public pressure has compelled some of these corporations to stand by their shareholders, employees, and customers, and quit the group. Here’s how they did it: 
Coca Cola, April 4:
“The Coca-Cola Company has elected to discontinue its membership with the American Legislative Exchange Council (ALEC). Our involvement with ALEC was focused on efforts to oppose discriminatory food and beverage taxes, not on issues that have no direct bearing on our business. We have a long-standing policy of only taking positions on issues that impact our Company and industry.” 
PepsiCo, April 5:
(from a Jan. 25, 2012 email to Color of Change; made public April 5) As we discussed, PepsiCo has been a member of the bipartisan group of state legislators ALEC, for the last decade, where we largely focused on issues raised by discriminatory taxes. We were not involved in the discussion on voter registration, nor do we serve on the Task Force which reviewed the proposals. In addition, PepsiCo pays the minimal, standard membership fee to ALEC and thus does not have influence over issues in which we do not actively engage. … Please note, at this point in time, PepsiCo is not a member of ALEC, as of 2012, as our membership expires each year. 
Kraft, April 5:
“We belong to many external groups, including ALEC, a nonprofit, nonpartisan organization that promotes growth and fiscal responsibility. 
“ALEC covers numerous issues but our involvement has been strictly limited to discussions about economic growth and development, transportation and tax policy. We did not participate in meetings or conversations related to other issues.”Our membership in ALEC expires this spring and for a number of reasons, including limited resources, we have made the decision not to renew.” 
Intuit, April 6:
“Intuit’s McKay explained to [the Center for Media and Democracy] that the company doesn’t “usually issue statements about membership in any organization” and declined to comment further.” 
Bill & Melinda Gates Foundation, April 9:
“The Bill and Melinda Gates Foundation today became the latest backer to withdraw financial support for the American Legislative Exchange Council. A foundation spokesman told Roll Call that it does not plan to make future grants to the conservative nonprofit, which has come under fire from progressive activists for its support of voter identification laws and other contentious measures.” 
McDonald’s, April 10:
“While [we] were a member of ALEC in 2011, we evaluate all professional memberships annually and made the business decision not to renew in 2012.” 
Wendy’s, April 11:
“Wendy’s is not a member of ALEC. Last year, we made the decision not to renew for 2012,” wrote a spokesman for Wendy’s in an email to Mother Jones.
The company sent out a tweet [April 11] from its official account, saying that their withdrawal from ALEC had been anticipated for several months. “We decided late 2011 and never renewed this year. It didn’t fit our business needs,” read the message. 
Mars, April 12:
“Earlier this year, Mars, Incorporated reviewed all of its trade associations and sponsorships and decided not to renew the ALEC membership in 2012.” 
Arizona Public Service, April 12:
Arizona Public Service lobbyist Jessica Pacheco said the company will not renew its membership in ALEC, a conservative state lawmakers’ organization known for drafting model legislation for members to sponsor in their respective states. The company’s membership expires this summer, she said. 
Reed Elsevier, April 13:
“We made the decision after considering the broad range of criticism being leveled at ALEC.” 
American Traffic Solutions, April 13:
“Our decision was based on how best to allocate our resources.
Common Cause has taken the fight against ALEC  to the Courts. The IRS Whistleblower Letter on ALEC follows:


IRS Whistleblower Letter on ALEC  **Download the letter here***

Due to size, links to exhibits below are select examples of materials submitted to the IRS. 
April 20, 2012 
Submission to the Internal Revenue Service under the Tax Whistleblower Act, 26 U.S.c. § 7623(b) regarding underreporting of lobbying and operation in furtherance of private corporate interests in contravention of 26 U.S.c. § 501(c)(3) tax-exempt charitable status
IRS Reference No. [Pending]

Eric R. Havian
Erika A. Kelton
PHILLIPS & COHEN LLP
131 Steuart Street, Suite 501
San Francisco, CA 94105
Tel: (415) 836-9000
Fax : (415) 836-9001
INTRODUCTION
This submission is made pursuant to the whistleblower provisions of 26 U.S.C. 7623 et seq. (the "Tax Whistleblower Act"). This matter concerns the massive underreporting of lobbying by the American Legislative Exchange Council ("ALEC"). While ostensibly a nonprofit organization under Section 501(c)(3) of the Internal Revenue Code, ALEC's primary purpose is to provide a vehicle for its corporate members to lobby state legislators and to deduct the costs of such efforts as charitable contributions. ALEC drafts "model" legislation provided by its corporate and legislative members, and lobbies for the adoption of that legislation. These goals are fundamentally inconsistent with ALEC's claimed tax-exempt status as a charitable organization under 26 U.S.C. § 501(c)(3), because (i) "no substantial part" of a charity's activity can be "attempting to influence legislation," and (ii) ALEC's activities do not qualify under any of the enumerated purposes of Section 501(c)(3).

Letter excerpts (details linked above)


•  Issue Alerts [Exhibit 1]: Email communications from ALEC to state legislators, titled "Issue Alerts," express ALEC's support for or opposition to policies and specific legislation. 

• ALEC Talking Points [Exhibit 2]: ALEC provides what it calls "talking points" to state legislators, tailored to specific state legislative bills, as well as talking points about broad policy areas.

• ALEC Model Press Releases [Exhibit 3]: ALEC provides boilerplate press releases to legislators that the legislators are encouraged to modify when the legislature introduces or passes one of ALEC's bills, in a further attempt to "influence legislation."
• ALEC Task Force Materials [Exhibit 4]: ALEC administers the operation of nine Task Forces. Each Task Force is made up of state legislators and representatives from private corporations.
• ALEC bill tracking documents [Exhibit 5]: ALEC spends resources preparing and researching the legislative process in anticipation (and as a result) of its lobbying.
• ALEC hearing testimony [Exhibit 6]: ALEC staff frequently testify in support of bills relating to their own model legislation, appearing before statehouse committee hearings, or by providing written comments for consideration, a core function of "influencing legislation." 

Pursuant to the Tax Whistleblower Act, we respectfully request that the IRS investigate ALEC's previous submissions to the IRS, in which it certifies that it does not spend any money on lobbying. Moreover, the IRS should investigate whether ALEC operates in contravention of its Section 501(c)(3) status, because it is does not operate "exclusively" for charitable and educational purposes, but instead operates to advance private business interests. Finally, the IRS should disallow the tax deductions taken by ALEC's for-profit corporate members, and collect taxes due from such members.

 Common Cause Dot Org


The legal system with deal with ALEC and the prospect of impropriety.  My real concern with ALEC is its  utility as the barn from which corporate America fed its greed.  Greed relative to ensuring legislation provide the optimal environment for conducting business and the dynamic was pretty much across industries and across the spectrum of competing corporations. Therefore, regardless of competition, corporations sit as entities with one common goal: earn as much as possible even if advancing legislation that may not benefit common people. Yet. I doubt one ALEC corporation has a CEO who earns less than $5 to $10 million total compensation per year. Mitt Romney would love the inner workings of ALEC, but I have to wonder if most people agree.

Additional Resources  Information


SourceWatch ALEC affiliate Companies A - Z
The Nation Magazine Law Makers quit ALEC
Open Secrets
Common Cause ALEC Talking-Points PDF

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