Advocacy Group Urges IRS To Probe US Chamber

by Mike Godfrey, Tax-News.com, Washington

02 November 2006

Public Citizen, a US consumer advocacy group, has filed a complaint with the Internal Revenue Service, asking for an investigation of political expenditures by the US Chamber of Commerce and its Institute for Legal Reform from 2000 to 2004.

According to Public Citizen, the Chamber and ILR spent millions of dollars in a "stealth campaign" to influence federal and state political and judicial campaigns without declaring this spending on tax returns as required by law.

Under section 501(c)(3) of the US tax code, tax exempt organizations are "expressly prohibited" from campaigning for or against a public official.

However, Public Citizen accuses the Chamber of seeking to "stack the deck with business-friendly judges and public officials" in state attorney general and supreme court races.

"The Chamber has secretly funded attack ads against candidates as part of a hostile corporate takeover of state supreme courts and state attorneys general offices," a Public Citizen statement said.

The group claims that the "electioneering effort" is led by Chamber President Tom Donohue and financed by a group of multi-nationals including Wal-Mart, Home Depot, AIG, Daimler Chrysler, the American Council of Life Insurers and other "special interests."

The complaint alleges that in the year 2000, the Chamber publicly claimed it spent $6 million on judicial races and took credit for winning 15 out of 17 state supreme court contests, although it failed to report any of this spending to the IRS as required by law.

"Our complaint today also cites the groups' failures to report grants to outside organizations as IRS tax forms require. Both groups failed to report grants to outside groups from 2000 to 2004. But in a 2005 deposition, a Chamber official acknowledged that the Chamber partnered with at least six outside groups to do their bidding," said the statement.

Public Citizen also wants the IRS to investigate the Chamber’s "unconventional commingling of money" with that of the Institute for Legal Reform, a separately chartered corporation, in the same bank account.

"This practice could have tax implications because IRS rules require 501(c) groups to pay taxes on either electioneering expenses or investment income, whichever is lower," said the group.

It is alleged that the ILR reported more than $38 million in revenue in 2004 but told the IRS it did not owe taxes on electioneering expenditures because it had zero investment income.

"We are surprised that the leaders of the foremost business association in the country so poorly manage money that a $38 million organization does not earn even a nickel of profit from interest," the group stated.

"Tom Donohoe claims his efforts are about “fairness and balance,” but the real goal is an assault on the civil justice system that would weaken enforcement by state attorneys general and limit consumer access to the courts," it added.

Recommended