Oct. 31, 2006

U.S. Chamber of Commerce Failed to Report Electioneering Spending and Grants, Public Citizen Asks IRS to Investigate

Chamber Spent Millions to Influence  State and Federal Races

WASHINGTON, D.C. – The U.S. Chamber of Commerce and its affiliated Institute for Legal Reform (ILR) failed to report millions in taxable spending from 2000 to 2004 intended to influence state-level attorney general and supreme court races and federal races around the country, according to a Public Citizen complaint filed today with the Internal Revenue Service (IRS).

Public Citizen also asked the IRS to investigate whether the U.S. Chamber and ILR, which are two separate legal entities, combined funds in a shared bank account to hide accurate reporting of investment or interest income for tax avoidance.

Court records, internal corporate documents and media reports indicate that the Chamber and the ILR engaged in a massive campaign to affect the outcome of state and federal races through direct expenditures and grants made to organizations that carried out the Chamber’s wishes.

“The Chamber is playing an elaborate shell game to conceal its gambit to stack the courts with hand-picked pro-corporate judges,” said Public Citizen President Joan Claybrook. “The IRS should promptly investigate its dubious tax reports and address any abuses that it finds.”

All 501(c) groups are required to report political expenditures on Line 81 of the IRS Form 990. Despite its own assertions of millions of dollars spent on electioneering, the Chamber and ILR failed to report any political spending from 2000 to 2003.

Public Citizen has asked the IRS to investigate whether the groups’ failure to report political expenditures and to provide accurate accounting of their grants to outside organizations resulted in tax avoidance and a violation of disclosure requirements.

In 2000, the Chamber claimed it spent $6 million on judicial races and took credit for winning 15 out of 17 state supreme court contests. In 2002, the Chamber said it planned to spend $40 million on political campaigns, divided equally between congressional and state-level attorneys general and judicial races. None of these activities were reported on their tax returns from 2000 to 2003.

In 2004, the first year since at least 2000 that the Chamber and the ILR reported political expenditures, both organizations appear to have underreported their spending. They reported a combined $18 million, but in a “President’s Update” memo released the day after the November elections, Chamber President Thomas Donohue claimed the group had spent up to $30 million in races around the country.

The Chamber and ILR also failed to report grants and allocations to outside groups as required by Line 22 of IRS Form 990. Both organizations reported no grants to outside groups from 2000 to 2004. But in a 2005 deposition, a Chamber official acknowledged that the Chamber had partnered with at least six outside groups to advance its agenda to avoid garnering unwanted critical attention. At least two 501(c) organizations, the Washington-based American Taxpayers Alliance and the Columbus-based Citizens for a Strong Ohio, reported receipt of contributions from the U.S. Chamber.

“The Chamber’s efforts are fundamentally a campaign to reduce corporate accountability in the courts and slam the courtroom door on consumers,” said Taylor Lincoln, research director of Public Citizen’s Congress Watch division. “Given the egregious corporate scandals of the past five years, the Chamber should prioritize cleaning up its own house before attempting a hostile takeover of the courts.”

To read the complaint, click here.

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