April, 23 2012, 03:37pm EDT

Common Cause Files IRS Whistleblower Complaint Against ALEC
Charges include misuse of charity laws, massive underreporting of lobbying, and obtaining improper tax breaks for corporate funders at taxpayer expense
WASHINGTON
The American Legislative Exchange Council (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, Common Cause charged today.
In a formal submission to the Internal Revenue Service Tax Whistleblower Office, Common Cause argued that ALEC's primary purpose is to serve as a vehicle for corporations to do taxpayer-subsidized lobbying. The filing includes thousands of pages of documents obtained by Common Cause that show extensive ALEC efforts to lobby state lawmakers and influence a wide range of legislation, clearly violating the terms of its tax-exempt status. The documents include ALEC talking points, "issue alerts," tracking documents and invitations to elected officials to gatherings paid for and attended by ALEC's corporate members.
The prominent whistleblower law firm Phillips & Cohen LLP is representing Common Cause pro bono on the IRS complaint. Phillips & Cohen has recovered more than $7 billion in fines and settlements for governments as a result of its whistleblower cases. The complaint seeks an IRS audit of ALEC and the payment of back taxes and penalties.
"ALEC is a corporate lobby front group masquerading as a public charity," Common Cause President Bob Edgar said Monday in announcing the complaint. "It tells the IRS in its tax returns that it does no lobbying, yet it exists to pass legislation that serves the economic and partisan interests of its corporate members in states all over the country. ALEC is not entitled to abuse its charitable tax status to lobby for private corporate interests, and stick taxpayers with the bill."
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.
The Common Cause submission under the Tax Relief and Health Care Act of 2006 is supported by more than 4,000 pages of ALEC records, and was prepared by Phillips & Cohen attorneys Eric R. Havian and Erika A. Kelton.
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. Among them:
- A May 2011 memo in which Ohio state Sen. Bill Seitz describes "considered advice from our friends at ALEC" in opposition to a bill to help the state collect damages on false claims. "We should at least consider their sage advice," Seitz wrote to a colleague.
- Hundreds of ALEC "Issue Alerts," emailed to ALEC-aligned lawmakers in advance of hearings and scheduled votes and including summaries and arguments in support of ALEC-endorsed bills. An Indiana ALEC alert last February urged passage of a bill designed to impede the Obama administration's health care reform plan. A February 2011 alert to New York lawmakers urged the defeat of bills to give shareholders a larger voice in corporate decisions about political spending.
- Talking points distributed by ALEC staffers to help lawmakers argue to reporters and their legislative colleagues on behalf of ALEC-backed bills and about ALEC itself. Included was a set of talking points titled "[Insert Legislator] Commends ObamaCare Repeal:"Vows To Finish The Job" With Health Care Freedom Act."
- *Legislative tracking documents distributed by ALEC to its member legislators to help them track the progress of ALEC-backed and opposed legislation. ALEC has acknowledged its support for hundreds of "model" bills each year, but the tracking documents indicate the group also works hard to block hundreds of bills outside its portfolio.
- *An articlein ALEC's 1995 "scorecard" sent to private sector members, celebrating the group's success in passing 23 percent of the 973 ALEC model bills introduced that year. "With our success rate at more than 20 percent, I would say that ALEC is a good investment," ALEC director Samuel Brunelli assured corporate backers. "Nowhere else can you get a return that high."
- *Invitations from ALEC to state legislators to attend corporate-hosted receptions and other exclusive events at ALEC conferences, coordinated by ALEC staff. These include an annual NRA sponsored clay pigeon shooting event and barbeque, and a "cigar reception" sponsored by Reynolds Tobacco.
While legislators pay $100 each for a two-year membership in ALEC, the complaint notes that most of the group's budget - estimated at $7 million - comes from its corporate sponsors. Companies pay $7,000 to $25,000 each for their ALEC memberships, gaining enhanced access to ALEC-member legislators as their payments increase. ALEC uses the corporate payments to host expense-paid seminars for lawmakers, generally at resort hotels and always closed to the press and public.
"ALEC has told the IRS that it does not spend a penny on lobbying, but the activities documented in the records we've given the IRS show that lobbying is its primary mission," Edgar said. "ALEC's own bylaws declare that its purpose is to '[d]isseminate model legislation and promote the introduction of companion bills in Congress and state legislatures' and '[f]ormulate legislative action programs.' Reduced to its essence, that's lobbying."
Edgar noted that ALEC has operated largely in secret. "No one challenges the right of a corporation or any group to hire lobbyists to advocate on their behalf," Edgar said. "But the American public deserves to know who's writing the laws being passed in state houses. ALEC needs to operate in the sunshine."
"ALEC and its members prefer to stay in the shadows however. They write legislation tailored to serve their interests and peddle it to our elected officials in private meetings at resort hotels; they keep out of sight while lobbying for that legislation in our statehouses and celebrate among themselves and take credit when it's passed. And then they lie about what they've done to exploit the tax code and get the rest of us to subsidize their work."
"For years, ALEC has obtained improper tax deductions for its corporate members while quietly wielding tremendous influence over our state governments. The IRS should force ALEC to clean up its act. Now."
Common Cause is a nonpartisan, grassroots organization dedicated to upholding the core values of American democracy. We work to create open, honest, and accountable government that serves the public interest; promote equal rights, opportunity, and representation for all; and empower all people to make their voices heard in the political process.
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Sanders Warns Musk's Call for $700 Billion in Cuts Is a 'Prelude' to Social Security Privatization
"Why do you lie so much about Social Security? To get people to lose faith in the system, and then you can give it over to Wall Street," said Sen. Bernie Sanders.
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U.S. Sen. Bernie Sanders warned late Monday that billionaire Elon Musk's new call for up to $700 billion in cuts to mandatory federal spending is an alarming step in the direction of Social Security privatization, a longstanding—and deeply unpopular—goal of right-wing politicians and corporate-funded think tanks.
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"Musk at one point in the interview cited a Government Accountability Office report which estimated that the government may lose between $233 billion and $521 billion annually to fraud, but that report covered the whole of the federal government—not just those programs," Perez wrote.
A 2024 report from the Social Security Administration's inspector general found that of the $8.6 trillion in Social Security benefits paid out between 2015 and 2022, roughly $71.8 billion was dispensed improperly—0.84% of the total.
"I think this is a prelude not only to cutting benefits, but to privatizing Social Security itself. I think that's in the back of their mind."
Musk also baselessly claimed that mandatory federal spending on programs such as Social Security, Medicare, and Medicaid is a "mechanism by which the Democrats attract and retain illegal immigrants, by essentially paying them to come here and then turning them into voters." (In reality, undocumented immigrants pay taxes that help finance Social Security and Medicare but cannot receive benefits from the programs.)
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"Well, he has called Social Security a Ponzi scheme. They have already laid off 2,500 employees of the Social Security Administration," said Sanders. "If you ask me, I think this is a prelude not only to cutting benefits, but to privatizing Social Security itself. I think that's in the back of their mind."
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Musk's latest attack on Social Security, a remarkably efficient program that has never missed a payment, came as his Department of Government Efficiency, or DOGE, has effectively taken over the Social Security Administration (SSA) and is pushing for massive cuts to the agency's staff and budget based on egregious lies.
"Appearing to misread a chart, for example, Musk said on social media in February that DOGE had identified payments to 'tens of millions' of deceased Americans—an incorrect assertion repeated by White House Press Secretary Karoline Leavitt," The Washington Postreported last week.
Everett Kelley, president of the American Federation of Government Employees—a union engaged in a legal fight against the Trump administration's purge of the federal workforce—wrote Monday that Musk's latest comments show that he "doesn't just want to cut the SSA workforce."
"He wants to eliminate Social Security entirely," Kelley added.
Joel Payne, chief communications officer at MoveOn Civic Action, said in a statement Tuesday that "Elon Musk and the Trump-led Republican Party are promising exactly what they have been trying to do for years: gut Social Security."
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The progressive advocacy group Social Security Works sounded a similarly defiant note.
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Kennedy, according to the Journal, "attended several of the dinners, but largely stayed quiet as Trump and others talked."
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"Big Pharma stands to profit immensely from a second Trump administration, especially if they can convince you and President Trump to abandon policies like Medicare drug price negotiations and patent reform that would save Americans hundreds of billions of dollars on lifesaving drugs," the senators wrote. "Indeed, the executives that attended these dinners have called on him to 'pause drug negotiations'—negotiations that are expected to save taxpayers $100 billion by 2032."
"You owe the American public an explanation for why you took part in PhRMA's influence-peddling events with President Trump, what happened at these meetings, and whether they will affect your commitment to ensuring that Americans receive the relief they deserve from high drug prices," the senators added.
RFK Jr. said he'd "clean up corruption" as HHS Secretary. So why'd he have dinner with Big Pharma executives at Mar-a-Lago with Trump? The American people deserve to know what kind of deals might have been made at those "million-dollar" dinners.
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— Elizabeth Warren (@warren.senate.gov) March 10, 2025 at 7:29 PM
The Journal reported that the CEO of Pfizer, which pumped $1 million into Trump's inaugural committee, was among the executives who attended the private Mar-a-Lago dinners. Eli Lilly's chief executive also joined at least one of the dinners.
Though Kennedy, an anti-vaccine conspiracy theorist, has vocally criticized Big Pharma and its political influence, the industry did not lobby against his nomination to lead HHS, which oversees the Medicare drug price negotiations that began during the Biden administration.
Last month, the head of the pharmaceutical industry's biggest lobbying group and several pharma CEOs met with Trump as part of a campaign to weaken the price negotiations, which threaten drugmakers' ability to jack up prices at will.
The negotiations have yielded significant results, but Trump's Centers for Medicare and Medicaid Services—an agency within HHS—has signaled it is open to altering the program.
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Student Defense president Aaron Ament said in a statement that "when PSLF was created by a bipartisan act of Congress and signed into law by [President] George W. Bush, it was a promise from the United States government to its citizens—if you give back to America, America will give back to you."
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American Federation of Teachers (AFT) president Randi Weingarten explained that "PSLF is based on the idea that borrowers who make 10 years of repayments, and who often forgo higher wages in the private sector, can avoid a lifelong debt sentence."
The teachers union sued the Trump's first-term education secretary, Betsy DeVos, "and rogue loan servicers for their failure to administer the program—and we won," Weingarten noted. "This latest assault on borrowers' livelihoods is a cruel attempt to finish the demolition job that DeVos started. The goal is to sow chaos and confusion—separately, the PSLF application form has already been taken offline, making it effectively inaccessible."
The Economic Policy Institute pointed out Monday that "since the creation of the PSLF program, more than 1 million borrowers have received student loan forgiveness, largely due to fixes made under the Biden administration."
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Student Borrower Protection Center executive director Mike Pierce blasted the order as "blatantly illegal and an all-out weaponization of debt intended to silence speech that does not align with President Trump's MAGA agenda."
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