Actions Follow Stunning New Yorker/The Trace Exposé Detailing How “A Small Group of N.R.A Executives, Contractors, and Venders Has Extracted Hundreds of Millions of Dollars from the Nonprofit’s Budget”
Former IRS Head of Tax-Exempt Division Marc Owens: “There is a Tremendous Range of What Appears to be the Misuse of Assets for the Benefit of Certain Vendors and People in Control”
NEW YORK – Today, in response to an article published by The New Yorker, in conjunction with The Trace, detailing how “a small group of N.R.A. executives, contractors, and vendors has extracted hundreds of millions of dollars from the nonprofit’s budget,” Everytown for Gun Safety has filed a complaint about the NRA’s tax-exempt status with the IRS, and is calling for federal and state investigations into the NRA’s operation as a charity.
“We’ve seen a lot of smoke — now there is fire,” said Nick Suplina, managing director for law and policy for Everytown. “It’s time for regulators to investigate the NRA and whether it has violated its tax-exempt charity status.”
Recent reporting by the New Yorker (hereinafter “NRA Expose”) and other news organizations indicates the leadership of the National Rifle Association (“NRA”) has engaged in a pattern of related party transactions, financial mismanagement, and an utter lack of transparency. See Mike Spies, “Secrecy, Self-Dealing, and Greed at the NRA, The New Yorker, Apr. 17, 2019, available at https://www.newyorker.com/news/news-desk/secrecy-self-dealing-and-greed-at-the-nra.
The NRA is a purported charity and exempt from federal tax under section 501(c)(4) of the Internal Revenue Code and we write today to alert you to what we believe are activities that clearly fall outside of the NRA’s charitable purpose and mission. After reviewing the facts contained in the NRA Expose, Marc Owens, who for ten years headed the IRS division overseeing tax-exempt enterprises, said, “[t]he litany of red flags is just extraordinary … The materials reflect one of the broadest arrays of likely transgressions that I’ve ever seen. There is a tremendous range of what appears to be the misuse of assets for the benefit of certain venders and people in control. … Those facts, if confirmed, could lead to the revocation of the NRA’s tax-exempt status.”
Accordingly, and for the reasons set forth below, we call on the IRS to commence an investigation into whether (i) the NRA has violated the federal laws governing 501(c)(4) charitable organizations, and (ii) if so, consider what remedies are warranted, including potential revocation of the NRA’s 501(c)(4) status.
Everytown is also calling on the IRS, Congress, and state charities regulators to investigate the NRA, its officers and board members to identify violations of laws governing charities including whether the apparent pattern of financial mismanagement and self-dealing is so pervasive as to jeopardize the organization’s tax-exempt charity status. Today’s call and IRS complaint are based on the available evidence, including:
Payments and other financial arrangements with executives and insiders at the NRA that resulted in millions of proceeds going to these executives and insiders;
Evidence that NRA employees and officers, including NRA President Oliver North, are paid by outside entities – such as public relations firms and insurance companies;
The revelation that the NRA Board of Directors Audit Committee “retroactively signed off on at least some of the NRA’s problematic [financial] transactions.”
Documentation reviewed by the New Yorker, which was purportedly prepared ahead of an emergency meeting of the NRA Board of Directors Audit Committee in July 2018 to discuss “whistleblowing reports,” listed concerns including, “NRA pays overbilled, deceptive, vague invoices to ‘preferred’ vendors and contractors” and “decisions are made in the best interests of vendors.”
Revelations that NRA Executive Vice President Wayne LaPierre has an arrangement that – “provides for consulting services and personal appearances upon the end of his employment, at an annual rate that starts at his currently contracted final base salary and is later reduced” — effectively serving as a salary for life.
The NRA’s 501(c)(3) sister charitable organization – the NRA Foundation — transferred $19.2 million and $18.8 million in tax deductible donations to the NRA (a 501(c)(4) organization that engages in political activity) in 2016 and 2017, respectively. On top of that, the NRA’s most recent public disclosures, for 2017, revealed the NRA Foundation gave a $5 million loan to the NRA. The New Yorker article indicated that a financial “audit from 2017 revealed that [the NRA] had nearly reached the limit of a twenty-five-million-dollar line of credit” and the NRA was forced to “borrow almost four million from its officers’ life insurance policies….”
The on-the-record comment from a former NRA employee that was attending events “where wine was pouring freely, and [he was] going to diners with other NRA executives where the bill would be a thousand dollars.” The former NRA employee added, “I just thought, if the typical NRA member knew that this is how the organization really works, then there’s just no way they would give money.”
Mounting evidence that the NRA engages in political activity outside of its stated purpose as a charity focused on U.S. gun rights. These efforts reportedly occur in political systems from Russia to Australia and other points in between.