The advocacy group Common Cause has filed a whistleblower complaint with the Internal Revenue Service against the American Legislative Exchange Council, a tax-exempt organization that promotes business-friendly legislation.

In the complaint submitted Monday, Common Cause accuses ALEC, which operates under Section 501(c)3 of the Tax Code, with misuse of charity laws, massive underreporting of lobbying activity, and obtaining improper tax breaks for corporate funders at taxpayer expense. In the complaint it has submitted to the IRS’s Whistleblower Office, Common Cause has included thousands of pages of ALEC documents as evidence. It claims 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.

In its formal submission to the IRS, 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, 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.

ALEC has been around since 1973, but the group has come under fire in the past year for helping push legislation such as the Stand Your Ground law, which came to attention in the wake of the Trayvon Martin shooting in Sanford, Fla. The group has also been associated with controversial laws such as voter identification requirements, which have been enacted in states across the country since the 2008 election, and anti-union laws that restrict collective bargaining rights. In recent weeks, amid the controversy over the Stand Your Ground law, a number of corporate supporters have severed their ties to ALEC, including Coca-Cola, Pepsi, Kraft, McDonalds, Wendy’s, Mars, and Blue Cross Blue Shield. Under pressure from its corporate supporters, last week ALEC ended its public safety and elections task force and said it would no longer focus on non-economic issues.

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.”

ALEC in turn accused Common Cause of being a liberal front group and called the IRS whistleblower complaint frivolous. legal counsel to the American Legislative Exchange Council (ALEC), issued the following statement in response to the frivolous IRS complaint by Common Cause against ALEC:

“The attacks on the American Legislative Exchange Council are based on patently false claims being made by liberal front groups that differ with ALEC on philosophical terms,” said ALEC legal counsel Alan P. Dye in a statement. “The current complaint mostly ignores applicable law and distorts what it does not ignore. After three decades of counseling clients on nonprofit and federal disclosure requirements, it’s clear to me that this is a tired campaign to abuse the legal system, distort the facts and tarnish the reputation of ideological foes. Without question, Common Cause is a partisan front group masquerading as an ethics watchdog.”

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 disputes that claim and includes several thousand pages of ALEC records, detailing extensive efforts to influence a wide range of state legislation.

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