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Senator gains support to tighten standards on tax-exempt seniors group


WASHINGTON -- Sen. Alan K. Simpson's long-delayed public confrontation with the American Association of Retired Persons produced few fireworks yesterday, but he finally picked up some Republican support in his campaign against the nation's most powerful senior citizens organization.

The 33 million-member AARP defended its tax exemption and its $170 million in income from business enterprises, most of it from the sale of policies by insurance companies with which the AARP has ties.

The group repeated its assertion that Mr. Simpson was trying to silence the AARP for its defense of the Medicare program, which both the Republicans and President Clinton propose to cut.

"What a chuckle," Mr. Simpson told the packed hearing. The Wyoming Republican insisted that he had "been after the AARP for years."

"I believe," Mr. Simpson said, "that AARP was established from the beginning to hawk insurance products tax-free."

Later, saying he was not engaged in a vendetta, he told reporters, "I'm just trying to see that people who make big bucks in commercial activities pay big taxes."

Mr. Simpson began the current round of criticism of the AARP at a hearing in early April on another subject. He followed that a month later with a news conference at which he said he would hold a public hearing May 25. That hearing was postponed until last week. After the AARP said its officials could not attend, he went ahead anyway, hearing testimony from critics, and scheduled yesterday's session for the organization to respond.

No other Republican senators appeared at last week's hearing. Mr. Simpson attributed that fact to worries about reprisals from the powerful organization. Two Democrats, Sen. John B. Breaux of Louisiana and David Pryor of Arkansas, did turn out, lending Mr. Simpson support but also making clear that the hearings should not be limited to the single tax-exempt organization.

Yesterday, Mr. Breaux and Mr. Pryor were joined by Sen. John H. Chafee, a Rhode Island Republican, who asked a few questions and told Mr. Simpson, "I came over to throw you a lifeline because I understand it's been lonely here."

And Sen. John McCain, an Arizona Republican, appeared as a witness to criticize the AARP. He accused the organization of basing public policy positions on "its very profitable bottom line," rather than on the wishes of its members.

He contended that it supported a 1988 law, subsequently

repealed, to expand Medicare coverage because its mail-order pharmacy stood to profit from the bill's extension of Medicare coverage to prescription-drug costs. A McCain aide said he had made similar charges when the legislation was being considered.

Mr. Simpson's complaints about the AARP center generally on two facets of its activities. First, it gets $86 million a year in federal grants while being allowed to lobby Congress.

Second, even though it is tax-exempt and has reduced postal rates, it derives nearly half of its revenue from business enterprises, mostly sales by insurance companies with which it has links, compared with 41 percent from membership dues and fees.

The AARP paid $135 million to settle a tax dispute with the Internal Revenue Service, although it still disagrees with the IRS over which of its activities are taxable. And it paid the Postal Service $2.8 million after being accused of avoiding $5.6 million in postage.

Mr. Simpson said he was considering introducing legislation to bar organizations like the AARP and the National Rifle Association from receiving and administering government grants. He raised the prospect of curtailing the unlimited ability of such groups to lobby Congress.

The major grants to AARP finance programs that provide jobs and tax counseling to older Americans. If the organization lost the grants, said Horace Deets, the executive director of AARP, "the sad effect would be" the end of the programs.

"Financially speaking, AARP would not be really impacted," he said.

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