NRA finances still shaky despite post-Parkland surge
If the National Rifle Association were a public company, listed on a major stock exchange, the seemingly insecure financial state of its membership arm might be a reason to worry for its future.
The NRA membership organization’s 2016 financial filing — the latest report available — is pockmarked with accounting red flags:
significant deferred revenues compared to cash balances; high allowances for uncollectible accounts; a negative balance for unrestricted net assets; $43 million in short-term debt; and a cumulative pension liability of $40 million.
The NRA, founded by Union Army veterans Col. William C. Church and Gen. George Wingate in 1871 to “promote and encourage rifle shooting on a scientific basis,” can count on several sources of funds for its myriad activities over and above the dues, advertising revenues and product sales produced by its tax-exempt, 501(c)l4) membership association. Contributions also pour in to four 501(c)13) public charities (NRA Civil Rights Defense Fund, NRA Foundation Inc, NRA Freedom Action Foundation and the NRA Special Contribution Fund also known as the Whittington Center) and an IRS Section 527 political action committee called the NRA Political Victory Fund, which is a separate segregated fund.
The NRA Political Victory Fund (PVF PAC), NRA Foundation, Inc., the NRA Civil Rights Defense Fund, NRA Special Contribution Fund and the NRA Freedom Action Foundation report their financial activities separately from the membership organization.
The NRA membership association branch claims to have about 5 million members, but that is difficult to verify. It has operated as a social-welfare organization since 1944, exempt from taxation on the revenue like a charity but differing from a charity in several ways.
According to an article by Samuel Brunson, a professor of law at Loyola University Chicago, donors to social-welfare organizations can’t deduct their gifts from their taxable incomes. Social-welfare organizations like the NRA membership arm can also support and oppose political candidates, unlike charities, which would lose their tax-exempt status if they did.
Finally, social-welfare organizations may lobby lawmakers as much as they want, as long as that effort is related to their core mission. Like charities, social-welfare groups must spend all their revenue on work tied to that mission or supplementing their endowments. They can’t pay out profits to employees, funders or anyone else.
The arm of the NRA membership organization that lobbies politicians is called the Institute for Legislative Action, or ILA. It was established in 1975, and the NRA website says it “is committed to preserving the right of all law-abiding individuals to purchase, possess and use firearms for legitimate purposes as guaranteed by the Second Amendment to the U.S. Constitution.”
The NRA’s political spending more than doubled between the 2012 and 2016 electoral cycles, rising to $54.4 million, according to the Center for Responsive Politics, a nonpartisan group that tracks the money reported to the government in federal elections. About $31 million of that sum supported President Donald Trump’s candidacy, according to Brunson’s research.
PVF PAC is a separately unincorporated NRA political action committee whose five officers are also NRA employees. The NRA routinely provides certain benefits to PVF PAC at no cost, such as use of office space and other administrative and support services. In 2016 the NRA paid $38.8 million for the PVF PAC’s administrative and fund-raising expenses. That is a significant increase from 2015, when the amount provided for PVF PAC’s support, which auditors said NRA executives believed was nonmaterial, was only $4.9 million.
Donations to NRA PVF, the political-action-committee arm, more than tripled in February 2018 in comparison with January contributions, according to data from the Center for Responsive Politics. That’s after activists, some politicians and celebrities joined the victims of the Feb. 14 mass shooting at Marjory Stoneman Douglas High School in Parkland, Fla., which left 17 dead, to advocate for gun-control measures and called out NRA sponsors and politicians who have received campaign contributions from the organization.
The PVF PAC raised $779,063 in February after reporting $247,985 in donations in January.
The Chicago Tribune, citing data from tech company Pathmatics, reported in mid-March that the NRA “aggressively increased” its advertising on Facebook in the weeks after the Parkland attack from an average daily spending of $11,300 in the 24 days before the shooting to $47,300 in the succeeding 24 days.
The NRA did not respond to a request for comment about the pace of its spending, the proportion of current funding from PAC donations versus memberships and the source of funds for its increased ad spending.
In the 2016 presidential election year, the NRA’s main membership organization spent more than it collected — $412.7 million vs. $366.9 million — resulting in a decrease of $39.2 million in net assets. That spending depleted its cash reserves by $7 million.
As of the end of 2016, the NRA also maintained its cash balance in an interest-bearing account in excess of federally insured limits, according to notes prepared to accompany an audit report prepared by RSM LLP. That firm also prepares the organization’s tax returns.
Prepaid members’ dues allocated to the cost of the magazine are deferred and amortized over the life of the membership. Deferred revenue — what can’t be recognized yet — grew to $39.4 million by the end of 2016 from $26.9 million at the beginning of the year, according to the NRA’s filing with the IRS for that year.
“As a result of the NRA’s precarious financial position, the organization is now even more dependent on a small number of telemarketing firms to pump up membership rolls,” said Brian Mittendorf, a professor and chair of the department of accounting & management information systems at Ohio State University’s Fisher College of Business. Those membership lists provide a source for other fund-raising campaigns.
The contract for one firm, Akron, Ohio–based InfoCision, calls for 100% of funds collected via credit card for new memberships and renewal of lapsed memberships to go to the outside firm, according to a contract posted on the North Carolina secretary of state’s charities site. The agreement meant only 52% of the total gross receipts collected by InfoCision in 2016 went to the NRA.
Mittendorf wrote in January that the U.S. Supreme Court has ruled that state laws capping the share of money that telemarketers may pocket from charities could violate the charities’ free-speech rights. Enforcement cases like the ones in Ohio and Illinois are rare because they can take years of effort, and are resisted by the charities themselves, who even have helped defeat efforts to require telemarketers to tell donors how their gifts are spent.
Despite signing multiyear contracts with professional fundraisers like InfoCision, and another with a firm called Allegiance that is headquartered at the same Fairfax, Va., address as the NRA, the organization set aside quite a bit for uncollectible accounts in 2016.
“Reserving more than 25% for uncollectible accounts is quite high for an organization that says it has such a loyal membership base,” said Mittendorf.
In 2016, the New York Post reported that the NRA failed to list the Political Victory Fund, its PAC, as one of its associated organizations until 2014. It told the IRS it spent nothing on lobbying each year from 2008 to 2013. Finally, in 2014, the NRA recorded $1 million in lobbying expenses, an amount that contradicts the figure reported to Congress of $3.4 million, according to the Center for Responsive Politics.
In 2014 the NRA also acknowledged for the first time that it receives membership dues, which start at $35 a year.
After a McClatchy News report suggested that the FBI had been investigating whether a top Russian banker with Kremlin ties illegally funneled money to the NRA to aid Donald Trump’s campaign for president, NPR reported that Senate Finance Committee ranking member Ron Wyden, D-Ore., wrote to ask the organization how and where it raises donations, in the context of other ongoing investigations.
“While we do receive some contributions from foreign individuals and entities, those contributions are made directly to the NRA for lawful purposes,” NRA general counsel John C. Frazer wrote to Wyden in a letter obtained by NPR. “Our review of our records has found no foreign donations in connection with a United States election, either directly or through a conduit.”
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Originally Posted by Zippyjuan
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