AARP: If Congress wants to take away our nonprofit status, it will have to change tax code

AARP, the GOP’s most recent scapegoat, has been preparing its defense strategy against attacks from Republicans that the nonprofit advocacy group for older Americans deserves to have its tax-exempt status stripped.

On Wednesday, members of the House Committee on Ways and Means released a report (PDF) about the AARP titled “Behind the Veil: The AARP America Doesn’t Know,” which accuses the organization of standing to profit from the Obama administration’s year-old Patient Protection and Affordable Care Act, which AARP heavily lobbied for.

House Ways and Means oversight subcommittee chair Rep. Charles Boustany (R-La.), health subcommittee chair Rep. Wally Herger (R-Calif.), and Rep. Dave Reichert (R-Wash.) have claimed that AARP will reap a “financial windfall” of more than $1 billion within the next year because of the new health care plan — largely because of AARP’s insurance ventures. Private carriers use AARP’s imprimatur to sell Medicare Advantage, Medigap and other insurance products, and, in return, the group gets royalties. Boustany, Herger and Reichert want to know how that money is being spent.

From the report:

As the facts set forth in this report reveal, AARP is not simply a non-profit entity claiming to advocate on behalf of America’s seniors. AARP is in fact a large, complex and sophisticated organization with over $2.2 billion in total assets and had revenues in excess of $1.4 billion in 2009 alone. When measured by the products it endorses and profits it derives from those deals, AARP is one of the nation’s largest insurance companies and by far the largest provider of Medicare plans to seniors. … Further clouding AARP’s image is a tangled relationship between the board members of its “for-profit” subsidiaries and the parent “non-profit” AARP which establishes AARP’s policy positions – often making it impossible to tell the two sides, and their competing agendas, apart.

AARP has denounced the claims, especially that it’s using royalty funds inappropriately. On a press call shortly after the report dropped Wednesday, AARP President Lee Hammond said, “We flatly reject any implication that any of our advocacy work is driven by revenue consideration; it was driven by the medical needs of 50-plus Americans.”

On Friday, the House Ways and Means committee is holding a hearing on AARP’s organizational structure and finances, which is intended to examine AARP and its affiliates, revenue, charitable giving, boards of directors and lobbying expenditures. The hearing will take place in the 1100 Longworth House Office Building, at 9:00 a.m.

There will be two panel of witnesses:
-Panel 1: AARP’s Chief Executive Officer A. Barry Rand and President Hammond
-Panel 2: William Josephson, J.D. of Fried, Frank, Harris, Shriver & Jacobson LLP; Frances R. Hill, J.D.,Ph.D, professor at the University of Miami School of Law

In the meantime, AARP has set up a page on its website where it has gathered financial documents and correspondence with members in Congress, which AARP is using as evidence that the accusations are unfounded.

On Thursday afternoon, Hammond engaged in a live Web chat open to the public, where he answered questions provoked by the report.

Highlights from the Web chat (spelling errors left uncorrected):

John R. in Florida: How can AARP says it’s not an insurance company when I see all your ads on TV selling insurance policies? I mean, really!
AARP President Lee Hammond: The ads tat you see on TV are produced and paid for by our providers. We license our brand to products that ring value to our members. AARP is not an insurance company.

The Real Stormin Norman: The report says you people fly first class and stay in fancy hotels all the time. I don’t want my dues going for that!
Hammond: We have a policy regarding travel for AARP board memebrs and staff that says you can fly business class for flights of longer then 5 hours. In my case, I seldom fly more than 5 hours and I purchase coach non-refundable tickets.

Christina Chiang: The report said that some of AARP executives has 7 figures salary. Is that true?
Hammond: No executive at AARP has a 7 figure salary. The number you are referring to is the final year’s payment to our former CEO, which included a deferred compensation and retirement plan payout that he had earned over 10 years’ service.

Flloyd: Why did you endorse that Obamacare?
Hammond: We endorsed the Affordable Care Act because it contained many of the priorities that our members told us they were concerned about, including closing the Rx doughnut hole, reducing excessive age rating by insurance companies that forced many seniors out of the insurance market, cracking down on Medicare fraud, and helping people plan for their future long-term care needs.

Richard: How do you choose which insurance products to endorse?
Hammond: We endorse our products and services depending on the needs that our members and others tell us they have. We invite companies to come and try to meet our requirements. We vet those companies thoroughtly and know that they are able to meet our priorities, when we’re satisfied, we lend our brand to that product.

Maxine: What will happen if they determine that AARP does not fit the guidelines of a non profit organization?
Hammond: We are very confident that we follow all the rules and directives of the IRS for 501c4 o onprofit status. Holders of this status include socail welfare organizations, and that is our mssion. If the Congress is interested in changing the tax code, we’re happy to participate in that debate.

Video of AARP President Lee Hammond debunking congressional report claims: