NRA’s Actions “Absolutely” Raise Questions on Tax-Exempt Status Testifies Non-Profit Tax Expert

Congressman Brad Schneider (D-IL), a member of the House Ways & Means Committee, questioned Marc Owens, former director of the Exempt Organization Division at the Internal Revenue Service (IRS), on his perspective on the National Rifle Association's (NRA) tax-exempt status in light of allegations of self-dealing and other wrongdoing.

Asked if the pattern of more than $500,000 spent on high end clothing raises questions about the NRA's tax-exempt status, Owens responded, "Absolutely." Owens suggested it could represent a diversion by the NRA, meaning "the use of a non-profit's assets, it's income, for the benefit of the people in charge."

Previously, Schneider questioned the Treasury Inspector General for Tax Administration J. Russell George on this topic at a hearing of the Ways and Means Committee in May 2019. When presented with hypothetical situations mirroring the allegations against the NRA, George called them "concerning," saying they would "raise questions" and warrant further investigation. That month, Schneider also urged the Internal Revenue Service (IRS) to investigate the tax-exempt status of the NRA in a letter to IRS Commissioner Charles P. Rettig.

Schneider previously requested documents from the National Rifle Association (NRA) related to allegations of wrongdoing in a June 2019 letter to LaPierre. Schneider requested other documents from Ackerman McQueen in an August 2019 letter.

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PARTIAL TRANSCRIPT:

Schneider:

I have some questions leaning particularly on your perspective as a former director of the IRS's Exempt Organizations Division. Recently, as you may be aware, there have been a number of revelations about questionable financial dealings by the leadership of the National Rifle Association, the NRA. NRA is a non-profit tax-exempt organization. An example of public reports are indications that the NRA has been using funds to pay for more than half a million dollars in high end Italian suits and lavish international travel for their CEO and Executive Vice President, Wayne LaPierre. It appears the spending was primarily routed through the NRA's long time public relations firm, Ackerman McQueen. My question is does the pattern of more than half a million, $500,000, spent on high end clothing and travel, does that raise questions to you about what's happening with the NRA and their tax-exempt status?

Owens:

Absolutely. It appears to be the sort of diversion that I actually testified before this committee about 30 years ago regarding this. That is the use of a non-profit's assets, it's income, for the benefit of the people in charge. And Congress enacted Section 4958 after those hearings, which lies in excise tax and applied it to section 501(c)(4) organizations and section 501(c)(3) organizations.

Schneider:

Thank you and it's not just Italian suits and travel. There's reporting indicating that the NRA was involved in plans to purchase Mr. La Pierre and his wife a home in Texas and by home, I mean six and a half million dollar mansion. Again, there was money rooted through Ackerman McQueen. NRA issues a $70,000 check to a newly formed LLC to help facilitate this purpose. Again, Mr. Owens, is it normal and customary for a nonprofit to buy or even consider buying a mansion for its leadership?

Owens:

That is unusual, but not unprecedented.

Schneider:

Okay, in your mind, do you think this would qualify as an abuse of an organization's subsidized non-profit status?

Owens:

A residence of that size and that cost is an extraordinary benefit and calls into question whether his total compensation is excessive under the conditions imposed by Congress in section 4958 of the code.

Schneider:

And is the concern not just protecting American taxpayers, who are subsidizing these types of organizations, but the donors to these organizations, who are submitting their dues or contributions — whatever it may be — to further the mission of the organization, not to buy a home of an executive?

Owens:

That is right and this may come as a surprise to the members of the organization who pay the dues.

Schneider:

So with respect to the fancy clothes and extravagant travel and the purchase of a lovely home, these were all paid for through a vendor — in this case through the PR firm, Ackerman McQueen — as opposed to the organization, should what may appear as laundering to an outside vendor, should that raise questions by our IRS?

Owens:

Yes, the standards that I have referenced, the standard of an excess benefit transaction, applies to indirect transactions, that is, transactions enrichment through a separate organization and then cycles back to the individual in place of control, that's not an uncommon way that diversion happens.

Schneider:

Well, thank you. I am out of time, but I will make clear, for the record, I have asked Ackerman McQueen for documents related to these activities that could expose the violations with respect to the IRA. I believe this is just the tip of the iceberg based on the reporting and this information will be very important. I am hopeful we can get that information from Ackerman McQueen. The NRA is blocking that, but I look forward to getting that information at a later date. Thank you. I yield back.