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May 3, 2012

Attorney General William J. Schneider

State House Station 6

Augusta, ME 04333

Dear Attorney General Schneider:

Im writing on behalf of Common Cause to ask you to investigate the activities of the AmericanLegislative Exchange Council (ALEC) in Maine to ensure that the organization is in compliancewith state tax and lobbying laws.

Founded in 1973, ALEC is an organization of nearly 2,000 state legislators, including a numberof members of the Maine legislature, and more than 140 corporations. ALEC is registered inMaine as a charitable organization and at the federal level enjoys tax-exempt status under section501(c)(3) of the Internal Revenue Code.

Common Cause has discovered compelling evidence that ALEC is operating in violation offederal tax laws. On April 21, Common Cause filed a complaint to the IRS under the Tax

Whistleblower Act seeking an investigation into ALECs lobbying activities, the collection ofunpaid taxes, and assessment of appropriate penalties. Based on more than 4,000 pages of ALECdocuments, the Common Cause complaint alleges violation of the groups tax-exempt status,massive underreporting of its lobbying activities, and improper tax deductions for ALECscorporate funders.

Ourpro bono attorneys at Phillips & Cohen, the nations leading whistleblower law firm, havedescribed our complaint as one of the strongest IRS cases they have ever taken.

In light of the evidence obtained by Common Cause and provided to the IRS, ALECscompliance with state tax, gift, solicitation and lobbying laws should be reviewed by your office

and/or appropriate state regulatory authorities.

ALECs primary purpose appears to be providing a vehicle for its corporate members to lobbystate legislators and to deduct the cost of that activity as charitable contributions at taxpayerexpense. Each year, about 1,000 pieces of ALEC-backed legislation are introduced instatehouses across America. ALEC actively promotes passage of those bills by communicatingwith legislators through emails, issue alerts, press releases, talking points and other materialsprovided to help ALEC-member legislators argue on behalf of ALECs legislation and/or in

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opposition to bills outside ALECs portfolio. ALECs by-laws declare that its mission is to"formulate legislative action programs" and to "disseminate model legislation and promote theintroduction of companion bills in Congress and state legislatures." ALEC also carefully tracksthe progress of its legislation in the states, produces scorecards to measure its effectiveness ingetting its bills enacted, and touts the passage of its bills.

While these activities meet any reasonable definition of lobbying, ALEC insists that it does notlobby.

Moreover, ALECs lobbying tactics raise serious questions about its compliance with Mainesgift regulations. ALEC gives legislator members ALEC Scholarships to cover their costs foraccommodations, transportation and other expenses to attend its national conferences and events,often held at luxury resorts. Some of the funds for these scholarships come directly from otherlobbying and corporate members but are funneled through ALEC. For example, according to thetax filings of PhRMA, the pharmaceutical lobbying group, it provided $365,075 to the ALECscholarship fund in 2010 to pay for these scholarships. Legislators families are also invited to

attend, and ALEC spends hundreds of thousands of dollars subsidizing childcare for itsmembers children during its seminars and other gatherings. These value of these benefits farexceeds the nominal membership dues that legislators pay.

As attorney general, you are charged with the responsibility of ensuring that Maines laws areproperly applied and enforced. In view of the overwhelming evidence that ALEC is engaged inextensive lobbying in violation of its federal tax-exempt status, I urge you to review itscompliance with all applicable state laws and to refer this matter to state regulatory authoritiesfor their action where appropriate.

Thank you for your attention to this serious matter.

Sincerely,

Arn H. Pearson, Esq.Vice President for Programs

Cc: Paul LePage, Governor

Charles Summers, Jr., Secretary of State

Jonathan Wayne, Executive Director, Maine Ethics Commission