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"It's remarkable. Essentially ALEC says that they do not lobby. They are a 501 (c)(3), which means that they're a charity, and as a charity they're able to do some lobbying but it's limited and you have to disclose it," Surgey said. "We have 990s [tax returns] going back many years for ALEC and consistently they tell the IRS that nothing they do is lobbying. They put a zero or they don't check the box that says, 'Do you do any lobbying, yes or no?' ... They're clearly trying to influence legislation."
If the IRS agrees, and ALEC is found to be in breach of the rules, the organization would have to reincorporate as a 501 (c)(4) and fully report its activities as lobbying. What's more, Surgey said there's the possibility that if ALEC is found to have improperly reported to the IRS, tax revenue lost when donations were recorded as tax deductible may be recouped from individual donors — an action that Common Cause included in its complaint.
"It's unlikely that the IRS would go after individual donors, but there's nothing statutorily to say they cannot do that," Surgey said. "They'd have to make a judgment that donors should have been aware. ... Most of the responsibility is on ALEC, but we also believe the corporations should have been aware that ALEC was doing what they were doing, and that's lobbying. ... We believe that they have some liability."
The whistleblower complaint is still working its way through the system, and Surgey said that the se kinds of cases tend to take "quite awhile." Still, he and others, like Graves at the Center for Media and Democracy, maintain that keeping pressure on ALEC is important for more reasons than just recouping tax revenue.
"It's also about making sure that these really important, fundamental debates happen in the open," Surgey said. "We got into looking at ALEC out of a concern that corporations have too powerful a role in our political system; they have a disproportionate power in the legislatures for a variety of reasons, and ALEC really seems to be the epitome of that."
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