ALEC Violates Federal Rules Governing Non-Profits

The organization that formed with Ronald Reagan’s support in the 1980’s has drawn some attention for its active role in promoting and pushing pro-corporate agendas among legislative bodies throughout the country.  The act of promoting and representing the interests of any specific group to a government in an effort to sway that body to make legislation or rules favorable to the group paying or supporting the promoters is called lobbying.

[Learn more about ALEC from ALEX Exposed and Sourcewatch]

Most people think of lobbyists as existing on the national level.  Must media press makes mention of the Washington DC lobbying culture; of the money floating around Washington DC and of the revolving door of congress members from service in the house or senate to obtaining paid staff positions with lobbying firms.  It stands to reason; their high level of insider knowledge and their exposure to sensitive information through committee and top secret work enables these former public servants to charge a high price for their knowledge and insider access.

But many folks don’t consider the open market available to corporations on the state level.  In contrast to the competitive and sometimes difficult market of capturing a congress person’s attention can cost dearly.  In contrast state legislatures offer an easy to capture market of state legislators eager to make a name for themselves, a national media unable to micro-focus on ever state issue and a public not always paying attention to or taking seriously their state legislature.  But folks should take it very seriously, just as ALEC does.  Corporations, no matter how large know that often state regulations can often lead to federal regulations if the citizens gain success also that dismantling the regulatory system can best take place over the long term, one state at a time.

But not only has ALEC embraced pro corporate causes that attempt to break down citizen action regulations and ordinances, ALEC also has welcomed social conservative activist groups as well.  ALEC has provided the support and manpower to push national agendas by way of gaining restrictions on such issues as reproductive freedom, on a state by state basis.  The ulimate goal of such, as stated by pro-life groups for years, is that by causing restriction on the local level, people will be further and further removed from the concept of accessible reproductive services as they dry up in their community.  This creates apathy to the national struggle for reproductive rights and effectively knocks out pockets of opposition to the national effort to restrict a woman’s freedom of choice.

No 501 (c) 3

Federal tax law is explicit in its rules about the functions of a charity non-profit classified as a 501-(c) 3. As outlined on the Federal IRS page titled Activities Which are Permitted But Must be Limited the limits of the law are pretty clear”

Basic Rule

501(c)(3) organizations may engage in insubstantial amounts of lobbying
or legislative activity. The courts have generally interpreted this to mean
5% or less of overall activities, financial expenditures, staff hours
or other measurable standards. Organizations that exceed this guideline
will have their 501(c)(3) status revoked, unless they have filed IRS
Form 5768 to elect the more liberal limits of section 501(h). (Not all
501(c)(3)’s are eligible to make this election.)  The rules that follow
apply only to those organizations that have made the election.

Direct Lobbying, Electing Organizations

  1. Definition

General discussion of controversial issues does not, alone, constitute
lobbying. In order for the IRS to find that direct lobbying has taken
place, there must be three elements:

  1. Specific Legislation
    This could be a bill or other piece of legislation already introduced in
    the legislature, or a specific legislative proposal.
    b. Reflecting A View
    In order to be lobbying, a discussion must take a position with respect
    to (support or oppose) the specific legislation.
    c. A communication with a legislator or a government official

Special rule – Discussion of initiatives and referenda are considered direct
lobbying (subject to more generous percentage limits) even though
communication is with the general public.

  1. Limitations

If all three of these elements are present, you have “Direct Lobbying.”  The rules  
for an organization which has made the section 501(h) election are as follows:

  1. The organization is allowed to spend up to 20% of its overall budget
    on direct lobbying without penalty.
    b. If more than 20%, but less than 30%, of the budget is spent on direct
    lobbying, there will be a penalty tax, but the 501(c)(3) status is not in
    jeopardy.
    c. If expenditures for direct lobbying average more than 30% of the
    organization’s overall expenditures over a four year period, the IRS can
    take away the 501(c)(3) tax exempt status.

(Caution! If the organization’s budget exceeds $500,000 per year, these
“safe harbor” percentages are reduced!)

III. Recordkeeping

  1. Keep track of the total amount spent directly for this kind of lobbying – long distance phone calls, postage, travel, payments to lobbyists.b. Paid employees, if any, should keep logs to determine the percentage of their salaries and benefits to be allocated to lobbying.c. Arrive at a reasonable method for allocating overhead and similar costs to the lobbying activity.

Considering that the ALEC organization exists solely for the representation of groups and even development of favorable legislation for them with the goal of influencing legislators voting decisions, it appears that they clearly qualify as a lobbying group.  Why hasn’t the federal government revoked their tax-free status, fined them and make them pay back the money they have taken from the taxpayer?  Continue with the video from Undercurrent below on this topic:

Thanks to Matt at NH Labor News

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