An investigation into the National Rifle Association's tax-exempt status by the New York State Office of the Attorney General will examine the involvement of the NRA Foundation in the organization's finances, the New York Times reports.
In addition to an internal power struggle between NRA president Oliver North and CEO Wayne LaPierre that led to North's resignation during the organization's annual meeting in April, the NRA is facing serious financial problems amid falling revenue and mounting legal trouble, the Times reports. A review of tax records shows that the organization has increasingly relied on cash infusions and other transactions involving the NRA Foundation to stabilize its finances — to the tune of at least $206 million since 2010. In April, the NRA and the foundation received separate letters from New York attorney general Letitia James' office requesting that they preserve all pertinent records. According to the Times, James's office is examining "transactions between the NRA and its board members, unauthorized political activity, and potentially false or misleading disclosures in regulatory filings."
At issue for investigators, tax experts told the Times, would be whether the funds from the foundation were used for charitable purposes, as required by law, or instead helped finance the NRA's political activities. Despite promising free office space and staff when it established the foundation in 1991, the NRA now charges the foundation more than $6 million a year, while outright transfers from the foundation listed for charitable purposes have risen fivefold since 2001 and exceed $100 million since 2012.
"It tells me that the NRA itself is in very poor financial health and they're being subsidized in large part by their foundation," said David Nelson, a former partner at Ernst & Young who specialized in tax-exempt organizations. "They're kind of running the organization into the ground."
The Times reports that NRA revenue from membership dues is down, its gun owners' insurance program faces a legal challenge, and its $25 million line of credit, which is secured by the deed to its headquarters, is nearly tapped out. The organization's financial predicament has been masked, however, by its ties to the foundation, which has more than $29 million listed as an asset on the NRA's books and without which the organization would have a negative net worth. An NRA spokesperson told the Times that the money was largely an endowment set up for the organization but that it also included reimbursements from the foundation — for staff, supplies, and rent — that had not yet been transferred.
Meanwhile, internal documents reported on by the Washington Free Beacon show that LaPierre, who earns more than $1.4 million a year, billed more than half a million dollars in personal and travel expenses to the NRA's public relations firm, Ackerman McQueen, which was paid $40 million a year for its services. William A. Brewer III, a lawyer for the NRA and a brother-in-law of Ackerman McQueen's CEO, informed the Times in a statement that the NRA billed through the PR firm "for confidentiality and security purposes."
Before leaving the NRA, North — who had a lucrative contract with Ackerman McQueen despite the fact that NRA president is an unpaid position — called for an internal review of billings, and the NRA recently sued the firm. Earlier this week, board member Allen B. West, a former congressman, called on LaPierre to resign, accusing him and current leadership of "outright lies" and claiming that board members had not been made aware of LaPierre's controversial spending practices. "It is imperative," said West in his statement, "that the NRA cleans its own house."