Resource Proposal #1 (more on proposals)

Type:  Government,

Topic for Paper: Examining Various Policy Solutions to ALEC’s Tax-Exempt Status

The American Legislative Exchange Council was registered as a 501 (c)(3), or tax-exempt organization several years after its formation in 1973. Since then, the nonprofit has been accused of engaging in lobbying activities, backing political candidates, and secrecy. Donors to 501(c)(3) organizations can expect zero tax liability on their contributions, and ALEC itself gains favorable tax rates under this status.

According to the IRS website link, registered 501(c)(3) organizations must not be action organizations. They are also restricted with regards to specific political and lobbying activities they can engage in. Some of the specifics within this section of the IRS tax code that I would beed to explore are the application process, retention, and reporting guidelines.

After my analysis of the tax code, I will then need to research potential red flags during the course of history of ALEC. Among the red flags include the Atlantic Bridge scandal, the drafting of model legislation, and the role of ALEC’s task forces. I look forward to exploring each of these aspects of the organization in the context of the IRS tax code.

My policy recommendation for ALEC will be based on my research and analysis of the tax code.  If my analysis deems ALEC to be in violation of the tax code given their history as an organization, then my recommendation would be to have the IRS reassess them in this capacity.

I think it is a good idea to know the tax code and if ALEC is in compliance or not.  At the same time, it is full of very smart folks and their lawyers, so I doubt they would do anything egregiously in violation of their 501c3 status.  But maybe… if they have deep pockets behind them, they may be quite risk tolerant compared to much more shoestring or image-conscious groups.  Like, the Sierra CLub is a well-known “brand.”  They would not want to risk their status as a legitimate charity.  At the same time, personally, I would want to err on the side of letting all kinds of groups get involved in policy-influencing…  and the line between helping that candidate and helping that candidate enact ideas my group cares about seems a very blurry line.

Resource Proposal #2 (more on proposals)

Type (Biz, Gov, or Soc): Society

Name of Resource and Citation: PRWatch – from ALECExposed Website:

Topic for Paper: Examining Various Policy Solutions to ALEC’s Tax-Exempt Status

This article talks about a complaint that Marcus Owens, a tax expert, filed with the IRS demanding that they investigate the integrity of ALEC as a tax-exempt organization. There are many news articles on this event, but I chose the one from PRNews because of their ties with the ALECExposed organization.

Written by Brendan Fischer of PRNews, the article also cites specific actions, not along party lines, that are worthy of an investigation. Fischer talks about the nature of “co-drafting” with corporations, pecuniary motivation, and ties to lobbying, which are all prohibited by the IRS for 501(c)(3)s.

Well, I didn’t know that about prohibited activities.  Seems a serious concern.  

Jordi, you made a great comment in my last resource proposal about “deep pockets” and whether or not ALEC has the ability to pay off the IRS with money in corporate donations and funding. This article examines that prospects of that theory, which is something that I will have to delve more deeply into via additional sources. It seems like such a simple contradiction that ALEC is making, and I find it hard not to believe that they are paying off the IRS.

I said paying off IRS?  Maybe I meant that its donors can pressure legislators to threaten the IRS budget, like we saw in the Wall Street article by Taibi (regardless of his tone).

Lastly, the article makes a policy recommendation: criminal action against ALEC leaders and the loss of its tax-exempt status. I like the format of this article and might use it as an outline for my white paper.

Ok.  Can ALEC simply change its status to something like a PAC or lobbying organization?  There are designated types of legal organizations that can actively do lobbying?  I am unsure the title or legal status, but would seem to be one possibility.

Resource Proposal #3 (more on proposals)

Type (Biz, Gov, or Soc): Business

Name of Resource and Citation:

Topic for Paper: Examining Various Policy Solutions to ALEC’s Tax-Exempt Status

This article from The Guardian, a business news source, examines the loss of key ALEC donors and funding for their organization after the Trayvon Martin incident. The article outlines the various forms of funding that ALEC receives and from which constituents.

They also have a section talking about the Jeffersonian Project, a sister organization to ALEC with a 501(c)(4) tax status. This entity was created by ALEC out of concerns that their activities constituted lobbying. The theory is that ALEC’s lobbying activities can now exist under this new organization to preserve the 501(c)(3) status of the ALEC organization.

This seems to address the 501(c)3 and other types of organization I mentioned above.

Also, according to the article, ALEC asks for all donations to go to the 501(c)(4) organization so as to eliminate an audit trail by the IRS. For this section of my paper, I will be examining the details of the 501(c)(4). I will be concerned with policy solutions and whether or not ALEC could potentially pay the IRS to look the other way (deep pockets). This article has a nice balance of information on both the topics of funding and the Jeffersonian project in the wake of the Trayvon Martin case.

Why Jeffersonian?  Like Thomas Jefferson?  hard to imagine he would have approved of the use of his name for this!  I wonder if you can find something from him about the problems of elites, political parties, and influence on the ideal of democracy.  Would be nice context.

Overall, I think you have good resources.  I think you need to be even-handed and look at how ALEC or its donors support its efforts.  Although, one can be supportive of its policy goals and not it use of tax-exempt laws to pursue those.   What have you got that is “pro-Alec”?


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