June 21, 1995 in Nation/World

Aarp Defends Tax-Exempt Status Wyoming Senator Says Lobby Misrepresents Views Of Members

Peter G. Gosselin Boston Globe
 

Republican Sen. Alan Simpson lashed out at the American Association of Retired Persons on Tuesday for what he said was the senior lobby’s misrepresentation of its members’ views and misuse of its tax-exempt status to make money.

Simpson, a Wyoming conservative and longtime critic of the 33-million-member organization, said he is considering legislation to prohibit groups such as the AARP from receiving federal grants and to require them to depend on membership fees, rather than endorsements and product sales, to retain their tax exemption.

“This is big, big business,” said Simpson, who charged that the group had abused its tax status by mailing out millions of health insurance sales appeals at non-profit postal rates “in blatant disregard of the law.”

AARP officials strongly defended both their tax exemption and their business ties, saying that both are used to help members, not the organization. “AARP is all about service, not making money,” AARP President Eugene I. Lehrmann told a Senate subcommittee hearing chaired by Simpson.

Lehrmann asserted that Simpson’s attacks have less to do with the group’s business and tax status than with its criticism of Republican budget plans, especially the GOP goal of cutting back Medicare. And although Simpson and a second Republican lawmaker, Sen. John McCain of Arizona, denied it, the thrust of their comments Tuesday suggested that politics was behind many of their complaints.

McCain ticked off a long list of issues on which the group’s position tracked that of Democrats, including opposition to the balanced budget amendment and support for President Clinton’s health plan. He charged that the group’s liberal Washington staff did not properly represent the generally more conservative views of its membership.

“There is no doubt in my mind … that the vast majority of senior citizens were unalterably, absolutely, singlemindedly and at times quite bitterly opposed to the president’s health care reform proposal,” which AARP’s Washington staff tentatively supported, he said.

Even with such charges and countercharges, Tuesday’s hearing was a far cry from the political “High Noon” that many had been expecting and suggested that Simpson’s assault on the seniors’ group may be more a kind of blowing off steam than a concerted legislative drive. AARP answered most of Simpson’s specific allegations.

The AARP reported $469 million in revenues last year, about half from sale of products including insurance, prescription drugs, mutual funds and travel services.

The lawmaker said that in 1992 AARP continued mailing health insurance sales pitches at non-profit postal rates for six months after the Postal Service told it to stop. But AARP executive director Horace B. Deets said the group settled the dispute by paying $2.8 million of $5.6 million in contested back postage.

Simpson said that the group received a $5-per-phone fee for encouraging San Diego-area members to buy cellular phones from a company that subsequently collapsed, then refused to help those who lost money. But Deets said the AARP had helped members get restitution.

The Wyoming lawmaker said that in order to keep taxexempt groups attuned to members’ wishes, the group should depend on membership dues, rather than than product sales, for a substantial portion of revenues. But Deets and others cited a recent General Accounting Office study that said AARP relies on dues for 40 percent of its revenues, while similar tax-exempt groups depend on them for less than 10 percent of revenues.

Nevertheless, Simpson garnered some unexpected support from Sen. John Breaux, a Louisiana Democrat on the Social Security and family policy subcommittee of the Senate Finance Committee.

“You’ve become a multiple-purpose organization,” Breaux told AARP leaders. “You have all types of income coming from licensing your name. I mean it’s like Andre Agassi and Michael Jordan, who give their name to endorse products to get royalties and revenues. But you all have done much better,” he said.

However, Breaux said that lawmakers should examine the conduct of all tax-exempt groups rather than just AARP before it acts. In recent years, a number of charitable groups such as the United Way of America and Knights of Columbus have been criticized for misusing funds or abusing their tax status.


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