Top Former Tax Code Enforcer Files Letter Asking IRS to Strip ALEC’s Non-Profit Status

The American Legislative Exchange Council, a right-wing group responsible for state voter suppression laws, “stand your ground” laws and other far right initiatives, is a 501(c)(3) organization — meaning that it does not pay taxes and that its donors can deduct any donations they make to the organization from their taxable income. Thus, we the taxpayers essentially subsidize ALEC’s right-wing lobbying because the amount of money in the public treasury is reduced in order to pay for ALEC’s activities.

According to a letter by Marcus Owens, a former chief enforcer of federal tax law governing non-profits, however, ALEC does not deserve to have the taxpayers subsidize its activities. The letter lists several ways ALEC allegedly violated the requirements to maintain its tax exempt status — including by engaging in too much lobbying and by filing false disclosure forms — but the most interesting claim in Owens’ letter is an argument that ALEC should lose its preferred status because it violates a rule against “generating business or providing pecuniary support” for for-profit businesses:

ALEC’s operating procedures give its corporate donors authority to approve or veto every legislative and policy proposal developed by ALEC’s Task Forces, and the organization’s Bylaws give corporate members disproportionate authority to appoint and remove legislators from the Task Forces. This effectively ensures that the only model laws distributed to ALEC’s Legislative Members and disseminated nationwide are those that have been co-drafted and subsequently blessed by ALEC’s corporate donors. . . .

[T]he motivation behind these policies is undeniably private in nature. Furthermore, the overwhelming success of many of ALEC’s proposals confirms that the benefits ALEC confers on its corporate members are hardly “nonincidental.” They are substantial and quite valuable. Indeed, many corporations may find them invaluable. Because ALEC is operated to further the private interests of its corporate members, it is not entitled to exemption from tax under section 501(c)(3).

To be clear, Owens wrote this letter for a client, a progressive faith group called Clergy VOICE, so the letter should not be read to represent his neutral view of the tax code any more that former Solicitor General Paul Clement’s briefs claiming that the Constitution implements the Tea Party’s policy preferences should be read to reflect the views of the United States government. Nevertheless, it is the latest piece of bad news for a right-wing lobby that is increasingly under fire. At least twenty-four funders have abandoned ALEC, including twenty for-profit corporations.