Indiana House Minority Leader Pat Bauer (D-South Bend) says he would remove ALEC's lobbying exemption from an ethics law he co-sponsored in 2010. Seth Perlman/AP
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This spring has brought constant controversy for the American Legislative Exchange Council, the conservative group of legislators and corporations that pushes free-market model legislation in the states — but it may not be over yet.

The tumult began with pressure from progressive groups Common Cause and Color of Change that caused 14 ALEC members, including Coca-Cola, McDonalds and Procter & Gamble, to drop out of the group. Thirty-four legislators have also quit.

Then ALEC announced in April it would shelve the task force that approved controversial voter identification laws and “stand your ground” gun laws that spread quickly in the states. And on April 20 Common Cause submitted a whistleblower complaint to the IRS, claiming ALEC is “a corporate lobbying group masquerading as a charity” that promises its donors a tax deduction.

It could take several years for the IRS to decide whether ALEC is indeed a lobbyist required to register with that label and disclose how much it spends on influencing legislation. But in three states — South Carolina, Indiana and Colorado — it turns out that ALEC has quietly, and by name, been specifically exempted from lobbyist status.

The laws in those states allow ALEC to spend millions annually hosting corporate lobbyists and legislators at three yearly conferences, send “issue alerts” to legislators recommending votes on pending legislation, and draft press releases for legislators to use when pushing ALEC model bills — all without registering as a lobbyist or reporting these expenditures.

Legislators can receive scholarships from ALEC’s corporate donors to attend conference events, or they can legally go on the taxpayer dime.

These exemptions are just now coming to light. In South Carolina, for instance, Rep. Boyd Brown (D-Fairfield) recently discovered a 2003 state law that exempts ALEC from registering or disclosing its lobbying expenditures. One of the South Carolina House bill’s sponsors was ALEC member James Harrison (R-Richland).

As reported in the Columbia Free Times, Brown introduced a bill in late April that would remove ALEC’s designation as the only organization in the state’s legal code that is exempted by name from lobbying rules.

“I can’t get in a car with a lobbyist and drive up the street,” said Brown in an interview. “But ALEC can give me a scholarship to fly across the country.”

The state’s lobbying law prohibits lobbyists from paying a legislator more than $400 a year for lodging, transportation, entertainment or food. At its task force meetings, ALEC covers two nights in a hotel and reimburses travel expenses up to $350. It also draws on corporate money to fund scholarships for legislators’ conference registration expenses, which range from $150 to $500.

In Colorado, the late state Rep. Thomas Ratterree successfully introduced a bill back in 1991 to amend ethics laws to exempt ALEC from lobbyist status. As a result, for ALEC legislators, “the expenses of such members for travel, board, and lodging related to such attendance [at ALEC events] may be paid from appropriations,” the state law reads.

The law also stipulates that if taxpayers are to foot the bill, then delegations to ALEC events “shall reflect equally the percentage of members from each party of the General Assembly.” All 18 of the state’s members, however, are Republican. Only a tiny fraction of ALEC’s 2,000 legislative members are not in the GOP, though the organization insists it is bipartisan.

Unlike the South Carolina law, the Colorado and Indiana statutes exempt several groups, not just ALEC. In Colorado, three other groups, including the Council of State Governments and the National Conference of State Legislators, are exempt.

In Indiana, six groups are expressly “not considered lobbyists”: the National Black Caucus of State Legislators, Women in Government, the National Conference of Insurance Legislators, the Council of State Governments, and the National Conference of State Legislatures, as well as ALEC.

ALEC member and Republican Speaker of the House Mike Murphy co-sponsored a 2010 Indiana ethics bill with Minority Leader Pat Bauer that laid out rules for lobbying disclosure. The original bill did not exempt any organizations by name. Bauer, a 42-year veteran of Indiana’s state House, says the Republican-led Senate Legislative Rules Committee amended the bill to exempt six organizations — including ALEC — before it came to a vote.

He supports revising the law to exclude ALEC. “Since the tsunami of 2010,” which gave Republicans new command in dozens of state legislatures, says Bauer, ALEC has pushed its legislation in Indiana more aggressively. “At the time this bill passed, they didn’t have that profile.”

But Julia Vaughn, director and lobbyist for Common Cause’s affiliate in Indiana, says any challenge to ALEC’s exemption would die quickly in the state’s heavily GOP legislature.

ALEC has deflected the negative press, arguing that the organization provides an educational, non-partisan resource for often understaffed state officials — and is no different from another exempt organization, the National Conference of State Legislatures. As corporations continue to drop their membership, ALEC’s press representatives claim they’ve been unfairly singled out by a left-wing “intimidation” campaign.”

The Denver-based National Conference of State Legislatures is a research and advocacy group that pools the resources of state legislators nationwide. Every state legislator is a member, making the group “as bipartisan as possible,” says Jon Kuhl, an analyst for NCSL. “Our president rotates every year between the parties.”

NCSL also endorses laws, but they face a high bar for NCSL’s seal of approval: legislators from across the political spectrum must pass them by a two-thirds majority. When NCSL does promote a law, it is usually something that members across party lines can agree on, like preserving state authority and battling unfunded federal mandates.

Both organizations do take corporate donations, but only in ALEC do corporations have voting rights. Alongside state legislators, representatives of corporate members propose and vote on the laws they want to see passed in states. Documents released this month by Common Cause show an overwhelming number of ALEC model bills get approved unanimously by task forces comprised of private and public sector members.

ALEC’s model laws and membership lists are kept private; NCSL’s endorsed laws are available online. These distinctions have led Common Cause affiliates in the states to demand that their attorneys general review and remove ALEC’s non-profit charity status.

Common Cause spent $190,000 last year as a registered federal lobbyist for campaign finance reform and President Obama’s jobs bill. Vaughn’s Indiana affiliate spent almost $11,000 in 2011 on lobbying, a figure it made publicly available in its filing with the state.

“ALEC spends a lot of time encouraging passage of laws, and everyone has a right to do that,” she says, “but they should have to disclose how much they spend doing it, just like us and the Chamber [of Commerce] and the AFL-CIO.”

Representatives of ALEC did not return multiple calls for comment, but its attorney Alan P. Dye told CBS News that the complaint to the IRS is “a tired campaign to abuse the legal system, distort the facts and tarnish the reputation of ideological foes.”

ALEC meetings have been conducted mostly behind the scenes for decades, but its conference later this week in Charlotte will likely draw more attention. Among the documents recently released by Common Cause is a schedule and agenda for the get-together. ALEC member think tanks from Michigan and Arizona will sponsor a slew of controversial model bills aimed at public sector unions. One would make it easier for public employees to call an election to decertify their union, and another would make it more difficult for unions to deduct dues from member paychecks.

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