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Friday, April 20, 2012

ALEC - Losing 501c3 Status Because of Members????

Yesterday NPR was talking about the tax exempt status of the American Legislative Exchange Council.  The transcript is a very interesting read –

Life presents interesting things for you to ponder.

And I would have left it alone except - (my emphasis)

But another issue remains. ALEC is a 501(c)(3) charity under the tax code. That means it's not supposed to do any "substantial" lobbying — and its donors get a tax write-off for their contributions.

As a 501(c)(3)charity — similar to the Red Cross or a religious congregation — ALEC is allowed to do some lobbying. The rule of thumb is up to about 20 percent of the budget. But on ALEC's annual tax returns, where it asks if the organization engaged in any lobbying activities, ALEC officers check "no."

Marcus Owens, a tax attorney and the former head of the Internal Revenue Service division on tax-exempt organizations, says it seems that "what ALEC does is either lobbying, or it isn't. And it appears to be all of what ALEC does. So it's kind of ... a zero-sum game here."

ALEC said it's being demonized by its ideological opponents.

Taking Action?

ALEC claims nearly 2,000 legislative members — state lawmakers who pay token dues — and some 300 private-sector members, mostly corporations, which cover the $7 million annual budget.

The public and private members together create model legislation — ready-to-enact packages that the lawmakers take back to their state legislatures.

Owens says there's a precedent for this case from the 1990s, when he was at the IRS, and it isn't one that would be good for ALEC.

In 1995, congressional Republicans asked former Rep. Jack Kemp, R-N.Y., to lead a commission on fixing the tax law. At the rollout, Senate Majority Leader Bob Dole of Kansas said the mission was a complete overhaul of the tax code.

"That's why we have asked Jack to re-examine the over 9,000-page federal tax code, to start with a blank piece of paper and design a system that is flatter, fairer and simpler," he said at the time.

The commission had a financing problem of its own. The Republicans wanted the private sector to pay for it. Potential donors wanted the tax deduction — something they'd get only if the commission were a 501(c)(3) charity.

The commission applied to the IRS, which said no. The commission went to court and lost, then went to appeals court and lost again.

Owens says the commission couldn't get 501(c)(3)status because it fell into the IRS definition of an "action organization."

"An action organization does not qualify for tax-exempt status," Owens says. "The regulations define an action organization as one whose purposes can only be achieved by legislation."

That's the argument that the good-government group Common Cause made when it asked the IRS to investigate ALEC last summer.


Key phrases

The Republicans wanted the private sector to pay for it. Potential donors wanted the tax deduction
That’s what ALEC does every day of every year of every century – set up tax deductions for their profit sector members.

In 1995, congressional Republicans asked former Rep. Jack Kemp, R-N.Y., to lead a commission on fixing the tax law. At the rollout, Senate Majority Leader Bob Dole of Kansas said the mission was a complete overhaul of the tax code.
BOTH with ties to ALEC!

The commission applied to the IRS, which said no. The commission went to court and lost, then went to appeals court and lost again.

Owens says the commission couldn't get 501(c)(3)status because it fell into the IRS definition of an "action organization."


And there is this:
Owens says there's a precedent for this case from the 1990s, when he was at the IRS, and it isn't one that would be good for ALEC.


Wouldn’t it be sweet justice 
if the precedent set in 1990
because of the actions of
two old ALEC members 
is responsible for taking out ALEC’s 501c3 structure?

PULL ALEC’s 501c3 status!
DESTROY ALEC!

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