New York State’s attorney general filed a lawsuit against the NRA in state court on Aug. 6, 2020, seeking to dissolve the gun-rights organization after investigating its finances for 18 months. Read story here.
The state alleges top executives siphoned off millions of dollars for their personal benefit. Read the court filing here.
Allegations of questionable financial dealings at the NRA have been public knowledge for several years. The NRA’s money comes from member dues and donations, but states have supervisory authority over private nonprofits. The NRA operates from a Virginia headquarters, but is incorporated in New York, giving that state’s courts jurisdiction over it.
It’s the latest shot in an ongoing legal war between New York’s Democratic politicians and the NRA, a politically active GOP ally, with clashing gun control and gun rights advocates cheering on the warring parties from the sidelines.
The NRA sued New York for damages in 2018 after the state targeted an NRA insurance program paying the legal fees of people who use guns and then claim self-defense, alleging “blacklisting” actions by the state cost the NRA its liability insurance coverage. The ACLU filed an amicus brief in support of the NRA in that case, arguing its free speech rights were being violated.
(An “amicus brief” is an argument by someone not a party to a case who has an interest in the legal issues of the case. Considering it is at the court’s discretion.) As far as I know, that case is unresolved.
Legal battles aren’t the NRA’s only problem. The organization is wracked by dissension, struggling with red ink, and watching its membership decline. It was intensely criticized for successfully blocking new gun legislation after a spate of school and mass shootings.
Photo: The NRA’s controversial CEO, Wayne LaPierre, tried to buy this mansion with NRA money, according to a 2019 Washington Post story (read it here).
This lawsuit by the AG of New York is going to last for years and rather than being a significant action it is likely to fail because it will be portrayed as an action against an organization supporting the 2nd amendment.
The New York AG certainly has cause. Though it should be asked where it the IRS in all this. Most of what the AG is trying to take action is within the power of the IRS and the IRS is nationwide and the NRA is likely to incorporate in Virginia (or New Jersey) if they have not already and dissolve the corporation in New York. The NRA does have real assets in New York the state could seize, but why should a group of corrupt governors and officers as the New York AG portays them be overly concerned about that.
The issue that most Americans will miss is that what is going on in the NRA is not all that unusual and that there is corruption in the non-profit sector of our economy. The IRS because of perceived scandals and because it is often more concerned about who becomes a non profit than whether those non profits operate under the regulations. The IRS is doing fewer and fewer audits of for profit and not for profit businesses. Non profits have many advantages and that means we should hold them accountable and at a higher moral and ethical standard than for profit businesses. The IRS probably should not be the sole argitrator for 501C4s because there are some conflict of issues there, perhaps the Department of Justice should have a team to advise and inspect the IRSs work on those. that might have stopped the problems with the tea party groups that were blocked or delayed. Though perhaps many of those groups should not be non profit at all.
One problem is that the IRS and states don’t even talk to one another when it comes to non profit governance and audits. Organizations can tell the State of Washington ooe thing and the IRS something different. Even pay the Department of Revenue sums of money and call it one thing and tell the IRS nothing about the money or call the source of the money something else or it is not taxes, or describe it as a different source of income.
While the IRS requires non profit corporations to make their last three years of tax forms to the public, and their formation documents, states typically make no such requirements.
Many non profits are above board, transparent, and open about what they do. Understandable they are a little less forthcoming about the details of money, and often that is understandable. Sometimes honest disagreements between an organization, members and the IRS can come up, or one group in the organization on how to keep the IRS from coming down hard on the group can create disagreement, and just being right may not be enough as Americans are woefully ignorant and more than a few attorneys are as well. Corruption can exist in any non profit and probably should as well there is money there. Just well meaning folk may not realize they are being taken for a ride by their friend or this hard worker for the animals they wish to save. There are of course non profits that really are about picking the publics pockets or the governments pockets and put them in the pockets of the folks inside. Often these organizations have what appear to be spotless IRS filings. So one has to be willing to ask uncomfortable questions. This maybe why the organization is having to spend so much for every dollar in donations. Whether the management fee for a class reasonable or a ruse to get around IRS requirements to report what officers and employees are being paid.
I think there are plenty of New York non profits that deserve the same treatment the AG is giving the NRA. I hope it happens, but I am not holding my breath. I think the IRS needs some more resources devote to non profits and the tax payer will see dividends that will more than cover what will be a minor expense. More collaboration between the IRS and state revenue offices. That Washington state take a more assertive role in oversight of non profits. The Secretary of State has powers the Secretary can use, and the Washington State Attorney General can help. There is some gold in them dar hills, and a progressive state should insure non profits deserve the tax breaks they are getting and serve the public or the reason the organization exists. And yes the public should take an interest in how non profits they deal with operate and take action when those organizations are in questionable waters. Yes some of it is dry and boring, but a lot of issues are common sense, and the organization being reasonable. Also the public realizing hey there is a chance you could be getting ripped off, particularly if you have an inkling that is what is happening. Or that the organization is getting ripped off there is a chance that is what is happening.