Watchdog group says N.J. AG needs to look at ALEC for tax fraud

Jessica M. Karmasek May 4, 2012, 12:00pm


TRENTON, N.J. (Legal Newsline) - A Washington-based watchdog group wants New Jersey Attorney General Jeffrey Chiesa to investigate a conservative bill-writing organization.

Common Cause sent a two-page letter to Chiesa Thursday, asking him to look into the American Legislative Exchange Council's activities in New Jersey "to ensure that the organization is in compliance with state tax and lobbying laws."

Common Cause, which is accusing ALEC of tax fraud, contends the organization is primarily a lobbying group and, as such, is violating its tax-exempt status.

ALEC, a 501(c)(3), is registered as a charity in New Jersey.

"Common Cause has discovered compelling evidence that ALEC is a corporate lobby masquerading as a charity. ALEC's compliance with state tax, gift, solicitation and lobbying laws should be reviewed by your office and/or appropriate state regulatory authorities," Common Cause President and CEO Bob Edgar wrote in the letter to the attorney general.

Common Cause describes itself as a non-partisan organization dedicated to "restoring the core values of American democracy, reinventing an open, honest and accountable government that works for the public interest, and empowering ordinary people to make their voices heard."

ALEC consists of mostly conservative state lawmakers -- though it says it has more than 2,000 Republican and Democratic legislators -- providing a forum for them to draft research, policy papers and model legislation.

This isn't the first time Common Cause has complained about the organization.

Last month, the watchdog group filed a similar complaint with the Internal Revenue Service.

It alleges ALEC also 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."

Common Cause filed its complaint with the IRS' Tax Whistleblower Office April 21.

Its filing included thousands of pages of documents that Common Cause says show "extensive ALEC efforts" to lobby state lawmakers and influence a wide range of legislation, "clearly violating the terms of its tax-exempt status."

The documents included ALEC talking points, "issue alerts," tracking documents and invitations to elected officials to gatherings paid for and attended by ALEC's corporate members.

Alan P. Dye, legal counsel for ALEC, has called Common Cause's complaint "frivolous."

"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," he said in a statement April 23.

"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."

Dye added, "Without question, Common Cause is a partisan front group masquerading as an ethics watchdog."

From Legal Newsline: Reach Jessica Karmasek by email at

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