Back in April, Common Cause filed a complaint with the IRS regarding the American Legislative Exchange Council, or ALEC. They maintained that the group’s political lobbying negates their status as a non-profit organization:
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).
Now it would appear that ALEC has been preparing for an audit from the IRS. In documents obtained by Bloomberg Newsunder the Freedom of Information Act, the organization, backed by the Koch brothers, contemplated starting a new organization under the 501c4 regulations, which governs many Super PACS. As a 501c4, the group would not be required to disclose their donors and it could potentially allow them to shield their lobbying activities:
ALEC hasn’t set up the affiliate, according to Kaitlyn Buss, a spokeswoman.
“While the American Legislative Exchange Council remains a 501c3 focused on the exchange of practical, state-level public policy issues among its members, we are always open to operational changes that will make us more effective,” Buss said. “However, we have no current plans to operate a 501c4 in the near future.”
Doug Clopp, an attorney for Common Cause, said the discussion of an affiliate is an indication that the group knows it is not a charitable organization.
“It looks like ALEC is covering its tracks,” Clopp said. “These folks are not a charity, they’re not the soup kitchen, they’re not the YMCA. They are, and always have been, aware that their activities are straight-up lobbying.”