Lobbyists Sue U.S. Over Ban on Deductions

WASHINGTON — A group of national associations is suing the federal government to overturn a new law that in effect places a tax on lobbying by businesses and trade associations.

The law, which took effect Saturday, ends the deductibility of lobbying costs as a business expense. For most groups that lobby, that means an immediate jump of up to 35% in their costs.

In a challenge filed in federal court late last week, the American Society of Assn. Executives and 10 other groups said the law is an unconstitutional tax on speech and association.

Many of the groups that joined the lawsuit said the law will cut their membership, since members could no longer deduct all of their association dues as a cost of doing business.

The provision was enacted as part of a massive deficit-reduction measure Congress passed last summer. At the time, the elimination of lobbying deductibility was estimated to bring in about $700 million in new tax revenue over five years. Congress had created the tax deduction for lobbying in 1962.

R. William Taylor, president of the ASAE, said his group asked its members to let the Washington office know if the law would hurt them. “Within 10 days we had almost 500 responses, saying ‘This is going to kill us,’ ” Taylor said.

The groups argue that the law will not only impede their constitutional right to lobby Congress, the executive branch and state governments, but also will impose burdensome record-keeping responsibilities and curtail useful information that now flows from associations to Congress.