At today’s House Ways and Means Committee hearing, Rep. Brad Schneider (D-IL) questioned the Treasury Inspector General for Tax Administration, the Honorable J. Russell George, about the tax-exempt status of an organization whose financial mismanagement and self dealing would be worthy of an investigation by the IRS. Then Rep. Schneider revealed that his hypothetical questions described public reports of financial improprieties and self-dealing within the NRA.
During a stunning exchange (complete transcript below), Rep. Schneider asked the Inspector General about a series of self-dealing scenarios within a tax-exempt organization. From profiteering board members, to executives with a stake in a vendor, to the payment of lavish travel of insiders, the Inspector General said such arrangements were “concerning,” “would raise questions,” and were, “definitely” worthy of regulatory inquiry. Rep. Schneider then revealed that these were no mere hypotheticals – each of these arrangements was drawn from publicly reported facts about the NRA.
Rep. Schneider also sent a letter to IRS Commissioner Charles Rettig requesting the IRS investigate “recent reports of possible wrongdoing by the National Rifle Association (NRA) which enjoys status as a tax exempt organization under Section 501(c)(4) under the Internal Revenue Code (IRC).” Rep. Schneider wrote that “The allegations against the NRA reported in The New Yorker on April 17, 2019, including instances of egregious self-dealing, deceptive billing practices, and preferences in contracting are most troubling.”
In response to the New Yorker/Trace report that detailed 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 has called on Congress and state charities regulators to investigate the NRA, its officers and board members to identify any violations of laws governing charities and has lodged a formal complaint with the IRS.
Last week, members of the Senate Committee on Finance, Senators Ron Wyden (D-OR), Sheldon Whitehouse (D-RI) and Robert Menendez (D-NJ) sent letters to LaPierre, former NRA president Oliver North and Ackerman McQueen to turn over “letters, third-party audits, memos and other materials as they look into allegations of self-dealing and examine the NRA’s nonprofit status,” according to the Washington Post. The New York Attorney General’s office has also begun an investigation into the NRA’s tax-exempt status and issued subpoenas.
Transcript of Rep. Schneider’s exchange with Treasury Inspector General for Tax Administration J. Russell George:
SCHNEIDER: Inspector General George, if I can, what I’d like to do is just raise a few scenarios that could represent improper behavior by a tax-exempt organization and get just a “yes” or “no” answer if you think the activity is troublesome or would warrant further investigation. The first one: let’s suppose a board member of a nonprofit organization owns a company that sells millions of dollars in products and services back to that same nonprofit organization and at inflated prices. Do you find this troubling? Yes or no?
GEORGE: It’s concerning.
SCHNEIDER: How about a senior executive and a top fundraiser for a nonprofit organization has a stake in a media company that the nonprofit directs millions of dollars in business to. Should this activity raise any flags?
GEORGE: It would raise questions, sir.
SCHNEIDER: What if the newly-selected president of the board of directors of a nonprofit organization subsequently received a contract worth more than a million dollars from the nonprofit’s largest vendor within days of assuming his new position. Would this create a likely conflict of interest?
GEORGE: It depends on the circumstances, but the potentiality exists.
SCHNEIDER: It’s something that would you would look at?
SCHNEIDER: Last scenario: let’s say the CEO of a nonprofit charged hundreds of thousands of dollars of lavish travel expenses to the nonprofit’s largest vendor without adequate documentation. Would that be something that the IRS should look into?
SCHNEIDER: Okay. So thank you, Inspector General. But I’ll ask again: we laid out four scenarios just presented. If they were actual cases, would these warrant further investigation of possible abuse of the non-profit tax exempt organization?
SCHNEIDER: Thank you. I agree. But as you might have surmised, these scenarios are not hypothetical. There are allegations of self-dealing within the NRA, a 501(c)(4) organization with five million members. It’s incredibly disturbing to see these allegations and to think that NRA executives are possibly misappropriating their donors contributions and abusing their nonprofit status for personal gain. And the American taxpayer is subsidizing the bill. This morning, I sent a letter to the IRS commissioner and I sent a copy to you requesting an investigation into these allegations and whether they warrant reconsideration of the NRA’s tax-exempt status. I would appreciate your attention to this matter.