The former head of the IRS’ Exempt Organizations division accused the conservative nonprofit American Legislative Exchange Council of lying about its assets in its federal tax filings in a letter sent to the agency Wednesday.
Marcus Owens, a lawyer at Caplin & Drysdale who for a decade directed the IRS division responsible for approving organizations’ charity statuses, said ALEC made conflicting statements to federal and state regulators in an attempt to maintain its status as a tax-exempt charitable nonprofit. A copy of the letter was obtained by Roll Call.
It’s the second complaint against ALEC that Owens has filed with the IRS this year on behalf of Clergy Voice, a coalition of Christian progressive ministers in the battleground state of Ohio. The clergy group is concerned that ALEC is violating its tax status and that the strict voter identification laws it promotes ultimately disenfranchise voters.
In a June letter, Owens accused ALEC of illegally lobbying state lawmakers and demanded that the IRS revoke its tax-exempt status.
The new complaint focuses on the organization’s Legislative Scholarship Program, which reimburses state lawmakers for food, travel and lodging when they travel to the nonprofit’s conferences. ALEC has repeatedly told the IRS that it does not control these funds, but told the state of Wisconsin the opposite, according to the complaint.
“We happen to think they were telling the truth to the state. We think they were lying to the IRS,” Owens said today in an interview with Roll Call. “That is the proverbial smoking gun. Now we have documentary proof.”
In May 2010, ALEC told Wisconsin’s Government Accountability Board that it raises and distributes the funds to pay for lawmakers’ travel itself. But in July 2012, when the group filed its IRS Form 990 covering that time period, it said the funds were not considered part of ALEC’s revenue or expenses because the group “has no ownership of the funds or control over how they are spent,” according to the complaint.
The characterization supports the group’s claim in the Form 990 that it has made “little or no expenditures for travel or entertainment of any federal, state or local public officials” and that it engages in no lobbying activities.
ALEC dismissed the latest letter as a “nuisance complaint.”
“This is old news and represents a tired attack from the usual suspects that have been attacking ALEC and other free-market groups for years,” Kaitlyn Buss, an ALEC spokeswoman, said in a statement.
The organization, which has also come under fire for its support of controversial “Stand your Ground” laws, is organized under section 501(c)(3) of the Internal Revenue Code and is barred from political activity.
It can lobby as long as attempts to influence legislation do not constitute a “substantial part” of its activities. Although its stated mission is to bring corporations and lawmakers together to craft and promote legislation, the 30-year-old group insists it does not lobby. Its activities have drawn complaints from several government watchdog groups, including Common Cause. Owens’ firm has represented Common Cause in past litigation with the IRS.
False reporting on federal tax returns has been found to be perjury, a criminal offense punishable by jail time, Owens said. The person who signs the Form 990 would likely be found liable, he said.
The IRS does not comment on individual cases.