[The following is a guest blog post by Alexandra F. O’Neill, Esq. and Daniel P. O’Neill, CFA]

Introduction[1]

Many have written about the NRA’s (National Rifle Association of America) close ties with the firearms and ammunition industry.[2] People have not sufficiently examined whether these ties should impact the tax-exempt status of the organization, however.[3] The NRA, a tax-exempt social welfare organization under section 501(c)(4) of the Internal Revenue Code of 1986, as amended (the “Code”), does not pay taxes on any of its net income. In addition, under the rules governing section 501(c)(4) organizations, it need not disclose its significant contributors to the public. This article examines the NRA’s activities and its finances in the context of the law governing tax-exempt social welfare organizations. The authors conclude that the majority of the NRA’s lobbying, education, training and publication activities operate to benefit a private interest: the firearms and ammunition industry. As a result, under the cases and rulings interpreting section 501(c)(4), the NRA does not primarily serve the community interest and should not qualify as a tax-exempt social welfare organization. Instead, the NRA should operate as a political lobbying organization to be accountable for its key interests: the firearms and ammunition industry.

NRA Activities

Chartered in 1871, according to the NRA’s website, the organization’s primary goal was to “promote and encourage rifle shooting on a scientific basis.” [4] The NRA today describes its mission as “to protect and defend the US Constitution; to promote public safety, law and order, and the national defense; to train law enforcement agencies; to train civilians in marksmanship; to promote shooting sports and hunting.”[5] According to its 2014 IRS Form 990, the NRA spent the majority of its resources on three main program services that serve the organization’s tax-exempt purpose: (1) $54.5 million on firearms education, safety, and marksmanship training; (2) $47.1 million on NRA-ILA legislative program services; and (3) $39.5 million on NRA membership communications. [6]

The NRA describes its firearms education, safety, and marksmanship training as “NRA training courses develop safe and responsible shooters through a network of certified instructors, training more people annually than any other organization.”[7] In the same paragraph, the NRA notes that it “is the world’s leader in firearms education, safety, and marksmanship training” and that “The NRA also engages gun owners in programs that promote all aspects of the outdoor lifestyle including hunting programs, shooting range programs, women’s programs, youth programs, competitive shooting programs, law enforcement training programs, gunsmithing programs, trainings and opportunities to shoot, hunt, and enjoy the outdoor traditions.”[8] On its website, the NRA provides some examples of its educational, training and competitive programs. The organization notes it has one million youth participating in NRA shooting sports events and affiliated programs with groups, such as 4-H, the Boy Scouts of America and the American Legion.[9] It hosts the National Matches at its shooting range in Ohio, where individuals participate in various shooting competitions.[10] The NRA offers hunter education programs and a NRA Police Firearms Instructor certification program. In addition, the organization certifies instructors to train gun owners in different firearms courses. Further, it has established the Eddie Eagle GunSafe® Program to educate children on what to do if they see a firearm in an unsupervised situation. Finally, the NRA also offers “Refuse To Be A Victim®” seminars to men and women.[11]

The NRA’s audited financial statements show that the organization spends little on the competitive, recreational and training programs described on the NRA’s website and highlighted in its tax filings. According to its 2014 audited financials,[12] the NRA spent $39.5 million on publications and $44.9 million on public affairs. The financial statements show an additional $94.6 million of program service spending. Of this amount, the NRA spent $5.6 million on competitions, $13.8 million on education and training, $1.4 million on hunter services, $3.7 million on law enforcement, and $4.9 million on recreational shooting. Thus, the NRA spent a total of $29.5 million[13] on various traditional educational, competitive and recreational programs. It spent 79% more than this total ($52.8 million) on legislative programs. While the financial statements do not describe these legislative programs, their name alone suggests this program spending should be grouped together with the organization’s spending on public affairs. Grouping the legislative program and public affairs spending together, the NRA spent $97.7 million on its legislative activities in 2014. Thus, the NRA’s financials suggest that the organization’s legislative activities are its most significant program service (in terms of spending).

According to the NRA’s Form 990, “NRA legislative action involves firearms rights, regulations and laws, range protection, international gun control threats, workers’ protection, self-defense, free speech rights, and a host of related matters.”[14] The NRA’s legislative action clearly benefits the firearms and ammunition industry. For example, the NRA has lobbied against legislative proposals to ban assault weapons.[15] By lobbying against assault weapon bans, the NRA helps to protect the profits of the manufacturers and dealers of such weapons. The NRA has lobbied against criminal background checks, such as the ones adopted as part of the Brady Handgun Violence Prevention Act.[16] The NRA also lobbied against the 2013 proposal by Senators Pat Toomey (R-PA) and Joe Manchin (D-WV) to expand these background checks to almost all gun sales.[17] The NRA’s lobbying against increased criminal background checks helps to protect firearms and ammunition sales as a sale to a criminal is a sale for the industry.[18] In addition, the NRA has lobbied for the enactment of legislation that shields gun manufacturers from lawsuits to protect firearms manufacturers’ profits.[19] Further, the NRA has lobbied to relax laws that restrict the ability to carry concealed weapons to help foster sales of concealed weapons.[20]

The NRA claims that the goal of its legislative action and legislative programs is to defend the constitution and to advocate against efforts to erode the second amendment.[21] The Second Amendment of the U.S. Constitution provides, “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.” An analysis of the meaning and interpretation of the Second Amendment is beyond the scope of this article. It is important to note, however, that Congress has passed laws to require registration of the manufacture, transport and sale of firearms, require background checks on the purchase of firearms and ban certain firearms, including assault weapons and machine guns.[22] No court has held that such laws violate the Second Amendment.[23]

The NRA publications also serve to benefit the firearms and ammunition industry. The NRA publishes three main magazines: the American Rifleman, American Hunter, and America’s 1st Freedom.[24] It also offers Shooting Illustrated, Shooting Sports USA, and NRA Family Insights, an online publication geared for children.[25] The NRA describes its magazines as containing the “most authoritative coverage from recognized leaders and subject matter experts,” and notes that, “NRA media vehicles serve to educate, inform, and reinforce the NRA’s primary exempt purposes and objectives.”[26] An examination of the magazines’ content shows, however, that the publications serve as marketing tools for the firearms and ammunition industry. For example, a 2015 issue of the American Rifleman included reviews of guns such as the Ruger Precision Rifle, which is a long-range rifle[27] and the Glock G43, which is a compact 9 mm Luger pistol designed specifically for concealed carry.[28] A 2016 issue of American Hunter included a review on Nosler’s BT (Ballistic Tip) ammunition and stated “Nosler’s Ballistic Tip bullets have had a stellar reputation for accuracy.”[29] The NRA’s political magazine, America’s 1st Freedom, contains articles celebrating the NRA’s and others’ success at fighting gun restrictions.[30] In addition, the NRA publications generate $25 million in annual revenue from advertisements, many from the firearms and ammunition industry.[31] In fact, firearms and ammunition companies affiliated with certain board members placed a significant number of advertisements in NRA publications. There was a full-page advertisement in a 2015 issue of the American Rifleman for Hornady’s Critical Defense® ammunition. Hornady’s advertisement describes the ammunition as “optimized concealed carry and personal defense handgun ammunition featuring the patented FTX® bullet that unlike conventional hollow points won’t clog when fired through clothing.”[32] Barrett® Firearms took out a full-page advertisement in a 2015 issue of American Rifleman for its M107A1® Suppressor Capable .50 BMG (.50-caliber Browning Machine Gun).[33] The M107A1® is a shoulder-fired .50 caliber high-performance semi-automatic rifle designed for combat purposes.[34] Sturm, Ruger & Co. took out a full-page advertisement in a 2016 issue of American Hunter that featured its Ruger American Rifle®. Ruger’s advertisement also featured its 2 million gun challenge stating “Join Ruger and help us raise $4,000,000 for the NRA.”[35] Rather than serving to educate the broader community, the NRA publications operate like for-profit trade publications promoting the firearms and ammunition industry.

NRA Source of Funds

The sources of the NRA’s revenues also demonstrate the influence of the firearms and ammunition industry on the organization’s operations. The NRA Bylaws state that the NRA is a nonprofit corporation supported by membership dues and contributions from public spirited members and clubs.[36] The By-Laws state further that the NRA is not affiliated with any arms or ammunition manufacturer nor with any business which deals in guns or ammunition.[37] Roughly 40 to 50% of the NRA’s annual revenues of between $226.2 and $361.6 million come from members’ dues. Another 26 to 33% of the NRA’s revenues come from contributions. In addition, approximately 15 to 17% of the NRA’s revenues come from advertising and member sales. From 2010 to 2014, the NRA’s revenue from membership dues grew from $100.5 million to $128.3 million. There was a one-year spike of member dues in 2013 of $175.6 million. It is likely that this was due to an increased number of life memberships in 2013. This type of membership involves a large one-time fee and the NRA recognizes the majority of the revenue from life memberships during the first year of membership.[38] The NRA’s revenue from contributions increased from $73.5 million in 2010 to $107.8 million in 2014. The NRA’s revenue from advertising grew from $20.9 million in 2010 to $25.4 million in 2014. The NRA received between $18.5 million and $30.2 million in revenue from member sales in those same years.[39]

The NRA is not required to disclose the make-up of the organization’s $107.8 million in 2014 contributions, which made up one-third of its annual revenue. The limited available evidence suggests that the NRA has received significant contributions from manufacturers and suppliers of firearms and ammunition.[40] For example, in 2005, the NRA established the NRA Golden Ring of Freedom program that honors members who give cash or assets totaling $1 million or more to the organization.[41] In 2013, five of the ten new Golden Ring of Freedom inductees were executives or board members of firearms and ammunition manufacturers or suppliers.[42] In 2014, all four of the new Golden Ring of Freedom inductees were executives or board members of firearms and ammunition manufacturers or suppliers.[43] In 2012, the NRA welcomed Smith & Wesson, a publicly traded manufacturer of firearms, as a Golden Ring of Freedom member. To earn this distinction, “Smith & Wesson, along with CEO James Debney, made a Voice of Freedom contribution and pledged a four year commitment to sponsor the NRA Life of Duty online network’s Patriot Profiles.”[44] In 2015, Smith & Wesson announced that it had donated $1 million to the NRA’s Institute for Legislative Action. The gun manufacturer presented the contribution at the 2015 NRA Annual Meeting in Nashville, TN.[45]

A number of firearms and ammunition manufacturers and suppliers have sponsored specific NRA programs. For example, Colt’s Manufacturing has provided support to the Warrior Features of NRA American Warrior digital magazine.[46] In addition, Brownells, the largest gun parts supplier, acted as the presenting sponsor of the “NRA Life of Duty” initiative, which is a class of sponsored memberships designed for military and police personnel.[47] For $50, qualified Life of Duty members receive $25,000 worth of life insurance benefits, $2,500 worth of travel assistance for families to visit a loved one wounded in action, gear discounts and a subscription to the digital magazine, NRA American Warrior.[48] While this program benefits NRA members, it also benefits Brownells, a company that sells to the US military and law enforcement. In 2011, Brownells launched a government programs & sales division “to develop even stronger relationships with Federal, State and Local Government agencies including Military, Law Enforcement, Private Security and other industry leaders.”[49] By sponsoring the Life of Duty program, Brownells provides a gift to members of the US military and law enforcement and thus encourages them to reciprocate and buy Brownells’ products.[50] As discussed in more detail below, the NRA’s ties to Brownells are also evident in the organization’s governance. Frank R. Brownell III, owner and Chairman of Brownells, was a former President of the NRA Foundation.[51] Pete Brownell, owner and CEO of Brownells, is currently the 1st Vice President of the National Rifle Association and a member of NRA’s Board of Directors.[52]

The NRA has encouraged other corporate fundraising efforts that benefit the firearms and ammunition industry. For example, in 2011, Sturm, Ruger & Co. CEO and NRA Golden Ring of Freedom member Mike Fifer announced Ruger’s “1 million Gun Challenge to Benefit the NRA” to sell one million Ruger guns between the close of the 2011 NRA Annual Meetings & Exhibits and the opening of the 2012 meetings.[53] Fifer pledged that $1 from each gun sold would be donated to the NRA Institute for Legislative Action (the “NRA-ILA”). Because over one million guns were sold, during the 2012 NRA Annual Meetings & Exhibits in St. Louis, Fifer presented a check for $1,253,700 on behalf of Ruger to the NRA-ILA.[54] In 2015, Ruger doubled down on its pledge commitment by announcing the 2 million gun challenge.[55] Ruger pledged $2 for each new Ruger firearm sold between the 2015 and 2016 NRA Annual Meetings, for a total commitment of $4 million that “will benefit the NRA Institute for Legislative Action (NRA-ILA) during the critical 2016 election cycle.”[56] Mike Fifer also helped convince Davidson’s, Ruger’s largest firearms distributor, to contribute $1 for every Ruger gun sold.[57] This is a $5 million pledge to the NRA-ILA from the firearms industry, which is contingent on the sale of two million guns. Ruger’s pledges to the NRA therefore helped Ruger promote the sale of its firearms.[58] Ruger’s contribution to the NRA-ILA, the NRA’s political lobbying arm, also furthered Ruger’s interest on Capitol Hill. The NRA also noted in its Ring of Freedom publication that Arsenal, Inc. had created a commemorative Jubilee Series AK-74 rifle and pledged that a portion of its sales proceeds would go to the National Rifle Association’s Institute for Legislative Action.[59] Like Ruger’s pledge, Arsenal’s pledge to the NRA helped to market its assault rifle and protect its interest on Capitol Hill. Glock, a global firearms manufacturer, has donated $300 thousand to the NRA since 2010 and an additional $300 thousand to the NRA’s Special Contribution Fund (a 501(c)(3) charitable organization in New Mexico).[60]

A number of the NRA’s other sources of revenue, in addition to its corporate contributions and sponsorships, can be tied to the firearms and ammunition industry. The NRA received $25.4 million in advertising revenue for 2014. A number of these advertisements are from the firearms and ammunition industry.[61] The NRA also generates over $25 million annually in revenue from member sales. The financial statements do not describe such member sales, but they likely include product sales to NRA members. For example, the NRA has an online store, which sells “everything the 2nd Amendment enthusiast needs to show their support; hats, decals, bags, shirts, books, and so much more.”[62] The store items promote the NRA and recreational gun use. In addition, the NRA’s significant revenue from advertising and member sales is more akin to for-profit trade or business income than income typically generated by a non-profit organization.

The firearms and ammunition industry has separately engaged in marketing efforts to promote and benefit the NRA. A recent advertisement for a new Taurus firearm offers a free one-year NRA membership with the purchase of any new Taurus firearm in 2016.[63] Taurus has effectively subsidized the NRA’s membership costs through this offer to help increase the organization’s membership rolls and its perceived strength. In 2014, Smith & Wesson CEO James Debney announced his company’s commitment to the NRA by “adding a company-paid NRA annual membership to its Employee Benefit Program for all full-time employees beginning in 2015.”[64] The NRA has often cited its growing membership as a source of the organization’s strength.[65] With concentrated financial support from the firearms and ammunition industry, as discussed above, the NRA in turn lobbies for measures that serve to strengthen the industry. Thus, the NRA and firearms and ammunition industry provide mutual support with the goal of furthering the interests of the firearms and ammunition industry.

NRA Governance

The NRA governance has also helped to cement the influence of the firearms and ammunition industry on the organization. A board of seventy-six directors governs the NRA. Seventy-five of the directors are elected only by lifetime members of the NRA.[66] Lifetime members must pay $1,500 for their NRA memberships.[67] Annual membership in the NRA, by contrast, costs only $40.[68] A nominating committee made up of nine lifetime NRA members, six of whom can be members of the Board of Directors or Executive Council, nominates the seventy-five directors.[69] Lifetime members and annual members with five or more consecutive years of membership, who are present at the NRA’s annual meeting, elect the seventy-sixth director.[70] This director can be chosen from write-in candidates.[71] Because the Board controls the nomination process of seventy-five out of seventy-six governing directors and the appointment of the NRA’s officers, and because only lifetime members can elect this Board, the NRA’s leadership is exclusive and not reflective of the entire community. Indeed, five of the seventy-five board members are executives or directors at companies that manufacture or supply firearms and ammunition. These five members are Ronnie G. Barrett, owner and founder of Barrett Firearms Manufacturing, Pete Brownell, owner and CEO of Brownells (Supplier of gun parts, and firearm accessories), Steve Hornady, owner and President of Hornady Manufacturing Company (manufacturer of ammunition and handloading supplies), Robert Nosler, owner and President of Nosler Inc. (manufacturer of ammunition and handloading supplies), and Sandra Froman, board director of Sturm, Ruger & Co. Sandra Froman is the past president of the NRA and a paid consultant for the NRA.[72] The sixth NRA board member affiliated with the firearms and ammunition industry is R. Lee Ermey. Ermey rose to fame as the drill sergeant in Stanley Kubrick’s film: Full Metal Jacket. He is currently a paid spokesperson for Glock, a global manufacturer of firearms. He has been Glock’s paid spokesperson for twelve years.[73] Two of the nine members of the 2015-2016 nominating committee were affiliated with the firearms industry: Robert Nosler, who is the owner and President of Nosler Inc. and a NRA board member and Sara Potterfield,[74] who serves on the board of directors for Midway Arms, Inc. (DBA Midway USA)[75] Two current members of the board of trustees and two former members of the NRA Foundation (discussed below), including two former presidents, are executives or directors at firearms and ammunition companies. Frank R. Brownell III, the NRA Foundation’s former President of its board of trustees, is owner and Chairman of Brownells, and Sandra Froman, a board director of Sturm, Ruger & Co., was also a former President of the NRA Foundation’s board of trustees.[76] Steve Hornady, a NRA Foundation board of trustee, is owner and President of Hornady Manufacturing Company, and George Kollitides, II, a NRA Foundation board of trustee,[77] was Chairman and CEO of Freedom Group (a major US manufacturer of both firearms and ammunition).[78]

NRA Legal History

The NRA originally claimed tax-exempt status under the predecessor to section 501(c)(3) as a charitable, literary, scientific or educational organization. In Hazen v. National Rifle Association of America, Inc., 101 F.2d 432 (D.C. Cir. 1938), the U.S. Court of Appeals for the District of Columbia denied this tax exemption.[79] The NRA argued that its property was used for educational purposes because it sought, among other things, to educate the youth of the nation in marksmanship and to encourage marksmanship throughout the United States, both as a sport and for the purpose of qualifying as finished marksmen those individuals who may be called upon to serve in time of war.[80] The court held that the educational phase of the NRA’s activities was “incidental and collateral to the social, recreative, promotional and propaganda phases which constituted the major reasons for the organization’s existence.”[81] Therefore, the court concluded, the NRA did not in any real sense relieve the government of its burden of public education. Rather, the court noted,

“If [the NRA] should succeed to any large extent in teaching the youth of the nation to shoot, without at the same time inculcating the discipline of military training, which is a fundamental part of the curriculum of colleges and academies maintained and approved by the government to provide such training, it is much more probable that the result would be, instead, a tremendous increase in the governmental burden of crime control.”[82]

Section 501(c)(4) Status

Although the NRA lost its tax-exempt status under section 501(c)(3), after the Hazen case, the IRS granted the NRA tax-exempt status in 1944 under the predecessor to section 501(c)(4) as an organization operated exclusively for the promotion of social welfare.[83] An examination of the case law and rulings interpreting section 501(c)(4) of the Code shows that the NRA does not meet the statutory requirements for exempt status as a 501(c)(4) social welfare organization. An organization qualifies for tax-exemption under section 501(c)(4) only if it is (i) a civic league, (ii) an organization not organized for profit but operated exclusively for the promotion of social welfare, or (iii) a local association of municipal employees, the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.[84] No part of a section 501(c)(4) organization’s net earnings, can inure to the benefit of any private shareholder or individual.[85]

The Treasury Regulations define an organization operated exclusively for the promotion of social welfare more broadly as one that is primarily engaged in promoting in some way the common good and general welfare of the people of the community.[86] Examples of social welfare organizations include “an organization operated primarily for the purpose of bringing about civic betterments and social improvements.”[87] Courts and the IRS have held that an organization must show that it makes its resources available and provides benefits to the entire community to be considered primarily engaged in promoting the general welfare of the people of the community.[88] An organization does not qualify as a social welfare organization if it is a social club operating for the benefit, pleasure, or recreation of its members or an organization carrying on a business with the general public.[89] A social welfare organization can engage in political lobbying with respect to specific issues.[90] The Treasury Regulations provide, however, that the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.[91]

Under the existing case law interpreting section 501(c)(4), a social welfare organization cannot be organized or operated primarily to benefit the private interest.[92] In Contracting Plumbers Co-op. Restoration Corp. v. U.S., 488 F.2d 684 (2d. Cir. 1973), for example, the U.S. Court of Appeals for the Second Circuit held that an organization formed to repair holes or “cuts” in New York City streets made by members in the course of their plumbing activities was not tax-exempt as a social welfare organization because it benefited the plumbers who formed the organization. The cooperative repaired cuts previously repaired by the city, where the city’s repairs had subjected the plumbers to potential liability for improperly filled cuts. The cooperative did not repair the potholes left by nonmember plumbers or other entities, however. The district court had held that the organization was exempt as a social welfare organization because the taxpayer’s value to the community and to its individual members was “indistinguishable.”[93] The U.S. Court of Appeals reversed. It held that because the cooperative provided substantial and different benefits to both the public and its private members, the court could not say the organization was “primarily” devoted to the common good as required by section 501(c)(4).[94]

The NRA’s legislative activities provide a separate and distinct benefit to the firearms and ammunition industry: they protect and promote gun sales and gun industry profits. They are, therefore, like the activities of the Contracting Plumbers Co-op, which helped protect the organization’s members from liability for improperly filled cuts, and operate primarily to benefit the private interest. The NRA might argue that its private benefits are indistinguishable from its community benefits – it seeks to defend the Second Amendment like a civil rights organization, such as the American Civil Liberties Union (ACLU). When the ACLU defends an individual’s right to free speech, it provides the same benefit to the individual defendant and the community – it seeks to guarantee the constitution’s right to free speech to both the individual and the broader community. When the NRA lobbies to defend the second amendment of the U.S. Constitution, it in addition acts to protect gun sales and profits. These activities benefit a concrete private interest – the firearms and ammunition industry. Under existing case law and rulings, these activities therefore cannot be said to be “primarily” devoted to the common good as required by section 501(c)(4).[95]

The NRA’s publication activities similarly benefit the firearms and ammunition industry. In addition, they provide a distinct service to NRA members similar to services provided by for-profit recreational journals. As such, under existing case law, the NRA’s publications cannot qualify as “primarily” devoted to the common good as required by section 501(c)(4). In American Women Buyers Club, Inc. v. U.S., 235 F. Supp 668 (S.D.N.Y. 1963), for example, the U.S. District Court for the Southern District of New York held that a club organized specifically for buyers of ready-to-wear clothes did not qualify as a tax-exempt civic league under section 501(c)(4), because, among other things, the services it rendered, such as employment facilities, information about sources of supply, lectures, dinners, an annual journal, were all primarily, if not exclusively, for the purpose of rendition of services to its members.[96]

The NRA’s recreational publications similarly provide a service to the NRA members by marketing various firearms and providing information on hunting and safari trips. The publications also generate roughly $25 million in annual advertising revenue.[97] As such, they are indistinguishable from magazines offered by private and for-profit trade or businesses. The NRA legislative publications, as the NRA’s legislative activities discussed above, provide a separate and distinct benefit to the firearms and ammunition industry by promoting the firearms and ammunition industry’s positions against restrictions on gun use to gain support from the broader community. As the court noted in Hazen, the pieces qualify more as propaganda than education.[98] Because the magazines operate like a for-profit magazine and operate to benefit the firearms and ammunition industry, such magazines are not primarily devoted to the common good as required by section 501(c)(4).

It is likely that the NRA’s traditional competitive and training activities would be considered activities that promote the common good and general welfare of the community under existing rulings interpreting section 501(c)(4). In Revenue Ruling 66-273, the IRS classified an organization operating a gun range as a social welfare organization when it was open to the general public and its facilities were available free of charge to units of the armed services of the United States for their use in conducting training courses.[99] As the gun range discussed in Revenue Ruling 66-273, the NRA’s competitive and training activities are made available to the general public. At most, however, including the organization’s spending on local field services, the NRA spent only $41.8 million of its $334.6 million 2014 budget, or 12.5% on such educational, training and competition activities (excluding spending on legislative programs). Two of the NRA’s 501(c)(3) charitable subsidiaries, the NRA Foundation and the NRA Civil Rights Defense Fund, contributed $17.8 million to the NRA to spend on qualified charitable purpose programs in 2014.[100] If we remove the $17.8 million from the total and the program eligible expenses, then it appears the NRA only spent $24 million of its own budget of $316.8 million. This is only 7.6% of its budget. The 2014 spending reported by the NRA is roughly consistent with its spending in 2013 and 2012 (i.e., between 12% and 15%).[101] By contrast, the NRA spent approximately $137 million, or 41% of its 2014 budget, on its legislative and publication activities, activities that do not primarily promote the common good under the case law and rulings interpreting section 501(c)(4).

The NRA’s fundraising efforts also benefit the private interest – i.e., the firearms and ammunition industry – rather than the broader community. As discussed above, the CEO of Storm, Ruger & Co. launched a “1 million Gun Challenge to Benefit the NRA” asking individuals to purchase 1 million guns in 2012. He then doubled-down on this challenge in 2016, partnering with the company’s largest firearms distributor, in an effort to raise $5 million for the NRA’s Institute for Legislative Action. While this initiative benefits the NRA, the Gun Challenge benefits Ruger by encouraging Ruger gun sales. Likewise, the NRA’s corporate sponsorships and other promotions serve to benefit the firearms and ammunition industry. Corporate sponsorships and promotions by Taurus, Colt’s Manufacturing, Glock and Brownells help promote firearms and ammunition sales. As such, under the existing case law and rulings, they do not primarily promote the common good.

Finally, the exclusive governance of the NRA is further proof that the organization does not operate to benefit the entire community. As noted above, only lifetime members, those who purchase $1,500 NRA memberships, can vote to elect the organization’s board of directors. In addition, six of the NRA’s board members are affiliated with companies that manufacture or supply firearms and ammunition. Also, the 2015-2016 nominating committee included two members who were either an owner or board director of a company in the firearms and ammunition industry. Two current members and two former member of the NRA Foundation’s board of trustees, including two former presidents, are executives or directors at companies that manufacture or supply firearms and ammunition. The organization’s governance is therefore representative of only certain members of the organization rather than the entire community. Moreover, the NRA spent approximately 47% of its funds on general, administrative and acquisition expenses in 2014.[102] For example, in 2014, the NRA spent $75.6 million on member services and acquisition, significantly more than it spent on its educational activities.[103] Such member services and member acquisition spending also does not benefit the broader community.

Conclusion

The burden is on the taxpayer to prove it benefits the community interest.[104] Under the existing case law and rulings, the NRA cannot meet this burden. The facts above show that the vast majority of the NRA’s spending benefits a distinct private interest—the firearms and ammunition industry. As such, the NRA should not be given the imprimatur of a civic organization and sanctioned as a section 501(c)(4) social welfare organization. The facts and the law clearly dictate that the NRA should not be tax-exempt.

Additionally, in 1990, the NRA established the NRA Foundation, a section 501(c)(3) tax-exempt organization, to raise money to fund gun safety and educational projects. According to the NRA, the Foundation benefits a variety of American constituencies including youth, women, hunters, competitive shooters, gun collectors, law enforcement agents and persons with physical disabilities.[105] In its articles of incorporation, the NRA Foundation notes that its purposes, among other things, are to “promote, advance and encourage firearms and hunting safety” and “to educate individuals, including the youth of the United States, with respect to firearms and firearms history and hunting safety and marksmanship.”[106] The NRA Foundation’s funding of “educational and scientific activities” are equivalent to those put forth by the NRA when it sought tax-exempt status as a section 501(c)(3) organization. Is the NRA Foundation a back door around the court’s ruling in Hazen to allow it to receive tax-deductible contributions? This question is for another day.

ENDNOTES

[1] The authors provided the National Rifle Association with a draft of this article in advance for fact-checking purposes and commentary. The National Rifle Association did not offer a response to the authors.

[2] See, e.g., Peter Dreier, “Mainstream Media Downplay NRA’s Close Ties to the Gun Industry,” Huffington Post, January 13, 2013, accessed on March 12, 2016, http://www.huffingtonpost.com/peter-dreier/nra-gun-manufacturers_b_2468565.html ; Violence Policy Center, Blood Money, How the Gun Industry Bankrolls the NRA, April 2011, accessed on March 12, 2016, http://www.vpc.org/studies/bloodmoney.pdf

[3] The IRS did audit the relationship of the NRA’s Charitable 501(c)(3) Foundation with the NRA and specifically, the use by the NRA of the Foundation’s money to make political contributions. See “IRS Said to be Auditing Conservative Groups,” 74 Tax Notes 773 (Feb. 10, 1997); “IRS May Be Engaging in Politically Motivated Audits or May Not Be,” 97 TNT 36-1 (Feb. 24, 1997).

[4] National Rifle Association, About Us, A Brief History of the NRA, accessed on March 12, 2016, available at https://home.nra.org/about-the-nra/

[5] National Rifle Association of America, Form 990, Return of Organization Exempt from Income Tax, 2014, Part I, Line 1 (On file with authors), hereinafter referred to as “NRA 2014 Form 990”.

[6] Id. Part III, Line 4.

[7] Id., Part III, Line 4a.

[8] Id.

[9] See “About Us, A Brief History of the NRA,” supra note 4.

[10] Id.

[11] Id.

[12] Note: The NRA made an accounting change to certain revenues and expenses in 2013. The authors made certain adjustments to the NRA audited financial statements between 2010 and 2014 so that revenues and expenses would follow a more consistent accounting methodology. The primary focus of the adjustments related to a new line item: Shows & Exhibits. The record of adjustments is on file with the authors.

[13] Note: The previous mentioned groups total $29.4 million when added together, though the total amount equals $29.5 million. The difference is due to rounding.

[14] NRA 2014 Form 990, Part III, Line 4b.

[15] See Eric Lichtblau, “Irking N.R.A., Bush Supports the Ban on Assault Weapons,” NY Times, May 8, 2003, at A1.

[16] P.L. 103-159, 107 Stat. 1536 (1993); Paul Houston, “Brady Bill OK’d By House; Gun Lobby Set Back,” LA Times, (May 9, 1991), at 1.

[17] Public Safety and Second Amendment Rights Protection Act, S. 649, 113th Cong. (2013); Gerald Seib, “Manchin Describes the Effect of an NRA Score,” WSJ, April 18, 2013, accessed on March 12, 2016, http://blogs.wsj.com/washwire/2013/04/18/manchin-describes-the-effect-of-an-nra-score/

[18] See Mike McIntire & Michael Luo, “Gun Makers Saw No Role in Curbing Improper Sales,” NY Times, May 27, 2013, at A1.

[19] Protection of Lawful Commerce in Arms Act, Pub. L. 109-92, 119 Stat. 2095 (2005); For a discussion, see Sheryl Gay Stolberg, “Congress Passes New Legal Shield for Gun Industry,” NY Times, Oct. 21, 2005, at A1; Tom Hamburger, Peter Wallsten & Sari Horwitz, “NRA-Backed Federal Limits on Gun Lawsuits Frustrate Victims,” Their Attorneys, Wash. Post, Jan. 31, 2013, 2013 WLNR 2512343.

[20] See Violence Policy Center, Cash and Carry: How Concealed Carry Laws Drive Gun Industry Profits, (July 2013), accessed on March 12, 2016, http://www.vpc.org/studies/cashandcarry.pdf ; Alix M. Freedman, “Tinier, Deadlier Pocket Pistols Are in Vogue,” WSJ, Sept. 12, 1996, at B1; Jack Nicas & Asby Jones, “Permits Soar to Allow More Concealed Guns,” WSJ, July 4, 2013, at A3.

[21] See NRA 2014 Form 990, Part III, Line 4b.

[22] See 18 U.S.S.C. § 922 for the laws regulating sale of firearms, including § 922(o) banning the sale of machine guns.

[23] While the Supreme Court overturned a Washington D.C. ban on handguns in District of Columbia v. Heller, 554 U.S. 570 (2008), it noted that “the Second Amendment does not protect those weapons not typically possessed by law-abiding citizens for lawful purposes, such as short-barreled shotguns.” Id. at 625.

[24]See NRA 2014 Form 990, Part III, Line 4c.

[25] NRA Publications, NRA Publications, accessed on March 12, 2016, http://www.nrapublications.org

[26] See NRA 2014 Form 990, Part III, Line 4c.

[27] Kelly Young, “Ruger Precision Rifle,” American Rifleman 163, no. 8 (August 2015): 50-55.

[28] B. Gil Horman, “The Glock 43 – Fashionably Late,” American Rifleman 163, no. 8 (August 2015): 63-65.

[29] Richard Mann, “Nosler BT Ammunition,” American Hunter 44, no. 3 (March 2016): 56-57.

[30] See, e.g., Dave Kopel, “Sons of Heller,” America’s 1st Freedom 16, no. 8 (August 2015): 44-47. This article celebrates decisions in federal trial courts that have followed the Supreme Court’s position in District of Columbia v. Heller. Also, Chris W. Cox, “On Campus Carry, We’ve Only Begun To Fight,” America’s 1st Freedom 16, no. 8 (August 2015): 12. This article highlights the NRA-ILA’s efforts and successes in advocating for the elimination of state laws regulating concealed weapons and advocating for total carry permit reciprocity among the 50 states and “stand your ground” laws.

[31] See National Rifle Association 2014 audited financial statements.

[32] John R. Zent, ed., “Hornady Advertisement,” American Rifleman 163, no. 8 (August 2015): 7. Note: NRA board member Steve Hornady is the owner and President of Hornady Manufacturing, Inc.

[33] John R. Zent, ed., “Barrett Firearms Manufacturing Advertisement,” American Rifleman 163, no. 7 (July 2015): 27. Note: NRA board member Ronnie G. Barrett is the owner and founder of Barrett Firearms Manufacturing.

[34] Barrett®, M107A1® Product Brochure, accessed on March 11, 2016, https://barrett.net/firearms/m107a1/#downloads

[35] John R. Zent, ed., “Ruger Advertisement,” American Hunter 44, no. 3 (March 2016): 11. Note: NRA board member Sandra Froman is a board director of Sturm, Ruger & Co.

[36] The National Rifle Association of America Bylaws, as amended May 18, 2009, Preamble (on file with authors) (hereinafter referred to as the “NRA Bylaws”).

[37] Id.

[38] See National Rifle Association 2014 audited financial statements, Notes to Financial Statements: Members’ Dues.

[39] See National Rifle Association 2010 to 2014 audited financial statements.

[40] See also Violence Policy Center, Blood Money II: How Gun Industry Dollars Fund the NRA (September 2013), accessed on March 12, 2016, http://www.vpc.org/investigating-the-gun-lobby/blood-money/

This article suggests that since 2005, corporations – gun related and other – have contributed between $19.3 million and $60.2 million to the NRA.

[41] Meg Guegan, ed., “2013 NRA Annual Meeting & Exhibits,” NRA Ring of Freedom 5, no. 1 (2013): 33.

[42] Id. at 32. This event honored new Golden Ring of Freedom inductees George Kollitides (Chairman & CEO of Freedom Group, Inc., a firearms and ammunition manufacturer); Pete Brownell (President of Brownells, a supplier of firearm parts), James Debney (CEO and President of Smith & Wesson), Walter McLallen (Vice Chairman of Freedom Group), Scott Blackwell (President of Freedom Group).

[43] Meg Guegan, ed., “2014 NRA Annual Meetings & Exhibits,” NRA Ring of Freedom 6, no. 1 (2014): 92-93. This event honored new Golden Ring of Freedom inductees Robert and Joan Nosler (Owners of Nosler Inc., a manufacturer of ammunition and handloading supplies), Jeffrey Buchanan (Executive Vice President and Chief Financial Officer of Smith & Wesson), and Bryan Tucker (CEO and President of Davidson’s, a major firearms wholesaler and distributor).

[44] Meg Guegan, ed., “Going Golden,” NRA Ring of Freedom 4, no. 1 (2012): 5.

[45] NRA-ILA [Institute for Legislative Action], Smith & Wesson Contributes $1 million to Benefit the NRA Institute for Legislative Action, accessed on March 12, 2016, https://www.nraila.org/articles/20150805/smith-wesson-contributes-1-million-to-benefit-the-nra-institute-for-legislative-action

[46] Meg Guegan, ed., “NRA Life of Duty,” NRA Ring of Freedom 3, no. 2, (2011): 27-40.

[47] Id.

[48] Id.

[49] Brownells, Brownells Launches Government Program and Sales Division, accessed on March 12, 2016, http://www.brownells.com/.aspx/lid=15494/GunTechdetail/Brownells-Launches-Government-Programs-Sales-Division

[50] See Robert Cialdini, Influence, the Psychology of Persuasion, 17-56 (2006) (for a discussion of the influence of the reciprocity principle on human action).

[51] See NRA Foundation 2013 Unified Registration Statement, dated October 15, 2014, Attachment 13, on file with authors and the Commissioner of the Department of Agriculture and Consumer Services for the Commonwealth of Virginia.

[52] See NRA 2014 Unified Registration Statement, dated 11/8/2015, Attachment 13, on file with authors and the Commissioner of the Department of Agriculture and Consumer Services for the Commonwealth of Virginia.

[53] Meg Guegan, ed., “2012 NRA Annual Meetings & Exhibits,” NRA Ring of Freedom 4, no. 1 (2012): 20-21.

[54] Id.

[55] John R. Zent, “Ruger Doubles Down With New Challenge To Support NRA-ILA,” American Rifleman 163, no. 8 (August 2015): 26, 28.

[56] Id.

[57] Id.

[58] Davidson’s, Inc., a firearms dealer, also teamed with Ruger to offer an NRA Special Edition .380 Ruger LCP pistol sold exclusively through Davidson’s online store, “www.GalleryofGuns.com” and pledged that for each pistol sold, Davidson would donate $10 to the NRA. This pledge thus marketed Davidson’s online business in addition to helping the NRA. See Meg Guegan, ed., “At a Crucial Time, Ruger Steps up in a Big Way,” NRA Ring of Freedom 3, no. 2 (2011): 11-14.

[59] Meg Guegan, ed., “Arsenal Ups the Ante in Support of the NRA-ILA,” NRA Ring of Freedom 3, no. 2 (2011): 11-14.

[60] Glock US, GLOCK Donates to the National Rifle Association at the 144th NRA Annual Meeting, accessed on March 12, 2016, https://us.glock.com/news/release/glock-donates-to-the-national-rifle-association-at-the-144th-nra-annual-meeting/

[61] See supra notes 32, 33 and 35.

[62] The official NRAstore.com, About NRAStore.com, accessed on March 12, 2016, http://www.nrastore.com/about-nra-store/

[63] See Taurus International, NRA Membership Offer, accessed on March 12, 2016, http://www.taurususa.com/NRA-Free-Membership.cfm

[64] Justin McDaniel, “Smith & Wesson Continues NRA Support with Major Donation,” American Rifleman, accessed on March 12, 2016, http://www.americanrifleman.org/articles/2014/3/27/smith-wesson-continues-nra-support-with-major-donation/

[65] NRA Vice President Wayne LaPierre told NRA members at its 2013 annual meeting, “The state of the NRA is stronger and larger than it has ever been. Our commitment to freedom is unwavering and our growth is unprecedented… By the time we’re finished, the NRA must and will be 10 million strong.” Gregory Korte, “Post-Newtown, NRA membership surges to 5 million,” USA Today, May 4, 2013, accessed on March 12, 2016, http://www.usatoday.com/story/news/politics/2013/05/04/nra-meeting-lapierre-membership/2135063/

[66] See NRA Bylaws, Article IV.

[67] The NRA website provides that a lifetime membership costs $1,500. See NRA, Special Offer for New Members Only!, accessed on March 12, 2016, https://membership.nrahq.org/forms/signup.asp

[68] Id.

[69] See NRA Bylaws, Article VIII, Section 1(b).

[70] See NRA Bylaws, Article VIII, Section 4 (governing election of one director at annual meeting) and Article III, Section 6(e) (governing requirements for voting to elect board of directors).

[71] Id., Article VIII, Section 4.

[72] See NRA 2014 Form 990, Part VII, Section A. Sandra Froman received $45,180 in compensation from the NRA in 2014.

[73] See Kie Wagner, of Glock US, email message to author, March 4, 2016, on file with author.

[74] John R. Zent, ed., “Assist in the Nomination of Directors,” American Hunter 43, no. 7 (July 2015): 83.

[75] Missouri Secretary of State, Midway Arms, Inc. 2015-2016 Biennial Registration Report, filed April 14, 2015. No. 00191635. Note: Sara Potterfield’s parents are Larry and Brenda Potterfield, who are the co-founders and owners of MidwayUSA. MidwayUSA sells gun-related products, including ammunition and high capacity magazines. See Steven M. Brown, “Thanks a Million, Larry and Brenda Potterfield,” NRA Ring of Freedom 5, no.1 (2013): 54-61.

[76] Massachusetts Attorney General, NRA Foundation 2004 Form PC, Attachments C and D.

[77] See NRA Foundation 2014 Unified Registration Statement, dated November 6, 2015, Attachment 13, on file with authors and the Commissioner of the Department of Agriculture and Consumer Services for the Commonwealth of Virginia.

[78] Mr. Kollitides stepped down from the Chairman and CEO role of Freedom group on June 9, 2015. He entered into a one-year paid consulting agreement as a senior adviser (i.e., through June 2016). See Remington Outdoor Company, Remington Outdoor Company Announces Changes to Senior Leadership, accessed on March 12, 2016, http://www.remington.com/press-releases/2015/remington-outdoor-company-announces-changes-senior-leadership

[79] See also N.R.A. v. Young, 134 F.2d 524 (D.C. Cir. 1943) (requiring the NRA to pay compulsory unemployment contributions under the Unemployment Compensation Act because it was not organized exclusively for charitable purposes).

[80] Hazen, 101 F.2d. at 435.

[81] Id. at 436.

[82] Id.

[83] See Letter from the Commissioner of Internal Revenue to the National Rifle Association of America, dated April 12, 1944, on file with author and the Commissioner of the Department of Agriculture and Consumer Services for the Commonwealth of Virginia.

[84] Section 501(c)(4)(A).

[85] Section 501(c)(4)(B).

[86] Treas. Reg. § 1.501(c)(4)-1(a)(2)(i).

[87] Treas. Reg. § 1.501(c)(4)-1(a)(2).

[88] “The organization must be a community movement designed to accomplish community ends.” Erie Endowment v. United States, 316 F.2d 151, 156 (3rd Cir. 1963); see also Rev. Rul. 68-244, 1968-1 CB 262 (holding that an organization that conducted an annual town festival was a social welfare organization under section 501(c)(4)).

[89] Id.

[90] Treas. Reg. § 1.501(c)(4)-1(a)(2)(ii).

[91] Id.

[92] Contracting Plumbers Cooperative Restoration Corp. v. United States, 488 F.2d 684 (2d Cir. 1973).

[93] Id. at 686.

[94] Id. at 687.

[95] Id.; See also Rev. Rul. 73-306, 1973-2 CB 179 (holding that a nonprofit organization formed to represent member-tenants of an apartment complex in negotiations with landlords, in litigation, and before local and Federal regulatory agencies did not qualify for exemption as a social welfare organization under section 501(c)(4)); Priv. L. Rul. 201221029 (May 25, 2012) (revoking the 501(c)(4) exemption of an organization aiming to educate and motivate emerging women leaders within a particular political party to run for office, because the organization’s educational training activities primarily benefited one political party).

[96] Id. at 672.

[97] See National Rifle Association 2014 audited financial statements

[98] Hazen, 101 F.2d at 436.

[99] Rev. Rul. 66-273, 1966-2 CB 222.

[100] See National Rifle Association 2014 audited financial statements, Note 14. Related Parties.

[101] See National Rifle Association 2012, 2013, and 2014 audited financial statements.

[102] See National Rifle Association 2014 audited financial statements.

[103] Id.

[104] American Women Buyers Club, 235 F.Supp. at 672 (citing to Erie Endowment v. United States¸316 F.2d 151, 153 (3d Cir. 1963) “Plaintiff has no natural right to tax exemption, but rather a Congressional balm granted because losses in tax revenues’ are deemed compensated for by the value of charitable work).”

[105] See “About Us, A Brief History of the NRA,” supra note 4.

[106] Articles of Incorporation of the NRA Foundation, Inc., filed August 3, 1990 (on file with authors).