Public Citizen Files Complaint Against Chamber of Commerce

The consumer advocacy group Public Citizen on Tuesday filed a complaint with the IRS, charging that the U.S. Chamber of Commerce failed to report taxable expenditures to help elect pro-business state attorneys general and judges.

The group asked the IRS to investigate what it said was the failure of the Chamber and its affiliated group, the Institute for Legal Reform, to report most taxable political expenditures as well as grants to other politically involved organizations in the 2000-2004 period.

The inaccurate reports "likely resulted in tax avoidance," said the complaint filed by Public Citizen President Joan Claybrook.

Claybrook, in a phone interview, said she assumed the Chamber and the ILR "didn't want to pay the tax and didn't want to reveal what they were doing." That, she said, "is a very risky strategy."

Linda Rozett, Chamber vice president for communications, denounced the complaint as "a politically-motivated, public relations stunt by an organization that is opposed to the U.S. Chamber. Our tax returns are a matter of public record. We stand behind their completeness, as well as their compliance with tax regulations and generally accepted accounting principles."

The Chamber, and groups such as the Sierra Club and the National Rifle Association, are known as 501(c) organizations after the section of the federal tax code that governs them. Generally, the Internal Revenue Service permits such groups to engage in partisan campaign activities provided that they are not their primary function. They must pay taxes on their political spending or their net investment income, whichever is less.

Public Citizen said the Chamber and the ILR, founded in 1998 to advocate legal system reform, did not report political expenditures from 2000 to 2003.

In 2000, according to the complaint, the Chamber claimed it spent $6 million to influence judicial contests and took credit for winning 15 out of 17 state-level supreme court contests. In 2002, the Chamber said it planned to spend $40 million divided equally between congressional and state-level judicial races, Public Citizen said.

In their 2004 returns the Chamber reported political expenditures of almost $4 million and the ILR reported $14 million. Public Citizen presented what it said was evidence that the groups actually spent considerably more.

Claybrook said she hoped the IRS would respond promptly to the complaint because the electioneering activity of 501(c) groups is a growing political issue. She also acknowledged that the tax agency can take as much time as it wants to decide whether to launch an investigation.