The public interest group Common Cause filed a long overdue complaint challenging the charitable nonprofit status of the American Legislative Exchange Council (ALEC) last week. The complaint seeks to strip ALEC of its 501(c)3 status, a status that connotes broad charitable benefits to the public that merit a tax exemption for donations to the organization.
The Common Cause action is fueled by the organization’s research into the actual workings of the shadowy lobbying juggernaut masquerading as a nonprofit, based on inside documents newly and previously acquired by Common Cause and aligned organizations. It is not a pretty picture if you happen to believe in elective government or the good works of the nonprofit sector.
A technical word here: there are many types of nonprofit organizations, a veritable alphabet soup of public purposes and private benefits to members. Of these, only 501(c)3 organizations are charitable organizations per se. Others, like 501(c)4s and 501(c)6s, represent social welfare organizations and business leagues, respectively; precisely the type of organization that should tag the legal status of ALEC. Contributions to each type are not tax-deductible.
According to ALEC’s 2010 Form 990, which I analyzed via guidestar.org, the organization claims its charitable exemption by virtue of an education mission. Its sole client base? Your elected state representatives. Its stated beneficiaries? You, the public. Its actual beneficiaries? Ideologically conservative legislators and the businesses that fund them.
Here is the ALEC mission statement:
To advance the Jeffersonian Principles of free markets, limited government, federalism, and individual liberty, through a nonpartisan public-private partnership among America's state legislators, concerned members of the private sector, the federal government, and the general public. To promote these principles by developing policies that ensure the powers of government are derived from, and assigned to, first the People, then the States, and finally the Federal Government. To enlist state legislators from all parties and members of the private sector who share ALEC's mission. To conduct a policy making program that unites members of the public and private sector in a dynamic partnership to support research, policy development, and dissemination activities. To prepare the next generation of political leadership through educational programs that promote the principles of Jeffersonian democracy, which are necessary for a free society.
Long and highfalutin as it is, the key words here are “Jeffersonian Principles,” because if this is merely an educational organization that espouses a theory of governance, that is allowed under the educational clause of the charitable definition. If it is, however, a cover for a conservative, partisan, i.e. Republican lobbying agenda, well, partisan politics are expressly verboten by IRS code.
And of course it is strictly partisan. It is no more purely “Jeffersonian” than Democrats are “Hamiltonian.” And the legislation it produces serves a corporatist and hard-right ideological agenda to the exclusion of everyone else. So, unlike the Boy Scouts, for example, there is no public in the public good, there is only partisan favoritism. In short, ALEC represents a legislative and charitable capture of game-changing proportions. It represents a new frontier in pay-to-play capitalism.
I am far from alone in reaching these conclusions. One commenter at guidestar.org wrote:
After researching ALEC for some weeks, it has become apparent that they are the extreme conservative group behind the voter suppression and anti-collective bargaining legislative passed through some state governing bodies in the last year. Basically it is a "Pay to Play" scheme in which corporate members spend lots of cash for membership and sponsorship positions that give them direct access to sympathetic politicians in state legislature. In many cases, their "model legislation" language has been passed into actual law with little or no change. Of the verified members, Koch Industries has been documented as a corporate member; the Koch brothers, if you remember have spent millions of dollars supporting extreme conservative positions and candidates. It is impossible to get a list of active corporate members and active legislative members. People I know have brought up ALEC with their legislators, only to have them quickly change the subject or try to tie this group to the National Conference of State Legislatures.
The other grounds upon which ALEC should lose its charitable status is that its primary raison d’être is to influence legislation. That it does so by creating legislation represents a new model perhaps, and allows legal nooks and crannies for lawyers to exploit in parsing the definition of lobbying. But f you take a clear-eyed look at what ALEC does, it’s straight-out pay to play lobbying with corporate members calling the shots and legislative members carrying their water.
The ALEC Form 990 alludes to a galling practice by which legislators are paid to attend ALEC’s legislative conferences by what are called “scholarships,” as if your legislators were needy students. It’s just corporations paying them to show up and do their bidding, but ALEC attempts to keep the payments in the shadows by the following logic as stated in its return:
ALEC is the recipient of funds from various outside organizations on behalf of State Legislators. Scholarships are payable, upon approval by the relevant State Chair, to State Legislators to reimburse them for travel expense incurred attending meetings of ALEC. The amounts received and disbursed by ALEC for such purposes are not considered revenue and expenses of ALEC as the State Chair retains the exclusive right to determine the expenditures. The cash held and retained liability are reported in the financial statements of ALEC.
This is just a legal fiction, of course. You can’t erase the need to report expenditures on the basis of some flimsy “State Chair” defense. It’s just a way to hide the names and amounts of money paid to legislative recipients. It is complemented by the $250,000 that ALEC pays to legislators for “childcare” provided during the conference. This figure and a variety of related practices came to light in the New York Times article “Nonprofit Acts as a Stealth Business Lobbyist.” But we’ll have to see what the IRS does with all of this. Because it would represent an attack on exclusively Republican, corporate, interests, a powerful, shrill, and exceedingly well-funded opposition will oppose any actions the agency takes. According to the Times, ALEC maintains that its actions are excluded from the definition of lobbying by virtue of its nonpartisan nature. There is no measure, however, by which the work can be called nonpartisan. The first giveaway might be that virtually no Democrats are included amongst the hundreds of state legislators served and paid by the organization. According to the article, “all but one of the 104 leadership positions were filled by Republicans.” And all of ALECs model laws are 100 percent conservative.
While the ALEC Form 990 lists only lawmakers on its board of directors, guidestar.org lists its corporate leaders, including GlaxoSmithKling, Intuit, Johnson & Johnson, UPS, and ATT, to name but few. These are the companies that sell you diapers and cell phones, and sponsor voter suppression laws and the now infamous Stand Your Ground laws. Why Johnson & Johnson would want to expand your right to shoot first and ask questions later may seem a little mystifying at first, but the truth is it represents just one element of a unified corporate-right front—a dangerous front—a front consumers need to reject in their buying habits regardless of what the IRS decides to do.
In the case of Stand Your Ground laws, ALEC has abolished the legislative task force, the Public Safety and Elections Task Force, that produced the model laws. This should indicate that they themselves realized how far over the line they had transgressed. At this point I can only speculate as to the origins of the Stand Your Ground model within the organization, but at any rate we can be fairly confident that it represented at least an informal alignment of the NRA and ALEC, spearheaded through ideological players like the Koch Brothers or legislators who carry water for the NRA.
And how does ALEC produce the sausage? Amazingly, according to their tax form, they spend just $17,000 on lawyers as a program expense, the same amount that they spend on plaques and gewgaws. That means that the law-drafting muscle—the language—is supplied exclusively by the corporate members, because we all know that elected officials rarely draft their own bills. And those corporate members are exceedingly forthright with their contributions because the organization spends just .047 percent of its annual revenue on fundraising costs. That is off-the-scale low. While legislators must spend hours a week, every week, fundraising from corporate “partners” to fill their coffers, the leadership of ALEC never even has to pick up the phone and ask their corporate partners for dough if you can believe their tax return. But of course you can’t.
It’s all a fiction, an elaborate fiction, and a very well-executed one. If the IRS challenges the charitable status of the organization, it will surely end up in court, and may well go to the Supreme Court, where yet another bastion of a free and voluntary society may be decimated in the thicket of so-called free market ideology. There's nothing free about it. It’s rigged. It’s tilt. It’s a good reason not to trust your state legislature. And that these corporate donors receive charitable tax deductions is primarily a symbolic insult, because the fact is they could write off membership in a 501(c)6 as a business expense anyway.
The now reasonably well-documented operations of ALEC give the impression that state legislators are no more than errand boys and girls for their corporate overlords. It represents an almost public acknowledgment that the game is rigged. If it isn’t corruption prima facie, it’s a fundamental corruption of the legislative process and the tradition of nonpartisan charitable autonomy this nation holds dear.
But we should defend real charities, charities that follow the rules, educate the pubic regardless of political persuasion, free of self-interest, and with a real deference to the tradition of nonpartisanship in the nonprofit sector by throwing these corporate interlopers out of the temple. And we should yank our legislators away from the trough, and crutch, and the anti-democratic impulse, that ALEC represents.