An August 8 editorial in The Washington Post argued in a closing paragraph for leniency for the National Rifle Association (NRA) from a penalty of dissolution proposed by the New York State Attorney General in its lawsuit alleging a spate of unethical, illegal, and financial chicanery against the Virginia-based but New York-chartered not-for-profit. The Post pleaded for an opportunity for the organization to reform and remain in existence, as has been the case for other similarly situated organizations.
There is no record that The Post advanced a similar appeal on behalf of New York’s lawsuit seeking dissolution of the Donald J. Trump Foundation, which had existed and operated under New York State laws for 30 years until its voluntary dissolution in December 2018. That legal action alleged, among other things, that Trump used the foundation’s charitable assets to pay off his legal obligations, promote Trump-branded hotels and businesses, and purchase personal items. The suit also claims that the foundation “illegally provided extensive support to his 2016 presidential campaign by using the Trump Foundation’s name and funds it raised from the public to promote his campaign for the presidency.”
Not-for-profits such as the NRA and Trump Foundation exist at the sufferance of the public and are, in effect, public trusts exempted by federal law from any obligation to pay taxes upon income received. . . . A cardinal rule requires that such organizations refrain from political activity and file annual reports designed to communicate how their funds are received and expended on behalf of their charitable purposes.
Not-for-profits such as the NRA and Trump Foundation exist at the sufferance of the public and are, in effect, public trusts exempted by federal law from any obligation to pay taxes upon income received under 501(c)(4) of the IRS code. A cardinal rule requires that such organizations refrain from political activity and file annual reports designed to communicate how their funds are received and expended on behalf of their charitable purposes. Unfortunately, political indifference at the federal level has all but eroded enforcement of these stipulations, leaving the states to take action. Incredibly, WAPO recommends that the NRA be reported to authorities like the IRS.
Few are unfamiliar with the activities of the NRA over the past decade, in particular as it has purposely involved itself in advancing individual ownership of firearms, protection of firearms manufacturers, and promoting political candidates supporting the organization’s purposes. In 2005, that support resulted in federal liability protection for gun manufacturers, which has hampered lawsuits by parents of children killed in the Sandy Hook shooting in Connecticut. Less well known and now exposed in the New York dissolution lawsuit is the self-dealing among NRA leadership involving millions of dollars. The NRA’s assets derive in large part from real estate interests and dues paid by members.
It is common in the not-for-profit world for prominent organizations to create a “foundation” as a conduit for raising funds to underwrite the parent organization’s activities. Such entities are subject to the same rules as all not-for-profits but exist primarily to add a greater semblance of charitable sheen. Foundations are likewise a common fundraising vehicle for colleges and universities.
At the same time as the filing of the New York action of dissolution, the Attorney General of the District of Columbia filed against the NRA Foundation, stating: “Charitable organizations function as public trusts—and District law requires them to use their funds to benefit the public, not to support political campaigns, lobbying, or private interests.
While the NRA itself was established in 1871 in New York, its foundation was incorporated in Washington, D.C., in 1990. At the same time as the filing of the New York action of dissolution, the Attorney General of the District of Columbia filed against the NRA Foundation, stating: “Charitable organizations function as public trusts—and District law requires them to use their funds to benefit the public, not to support political campaigns, lobbying, or private interests. With this lawsuit, we aim to recover donated funds that the NRA Foundation wasted.”
The Post’s entreaty to salvage the NRA in view of its long-time existence and in the interests of its membership suggested offering the organization an opportunity to reform itself. That potential epiphany appeared promptly to be dashed by the response of the NRA’s leadership to the New York lawsuit. Wayne LaPierre tweeted:
The NRA is well governed, financially solvent, and committed to good governance. We’re ready for the fight. Bring it on.
The NRA president went on that the New York lawsuit was a “baseless, premeditated attack on our organization and the Second Amendment freedoms it fights to defend.” And, not to be left out of the discussion, P45 chimed in with the suggestion that the NRA should move to Texas, where it would enjoy a “beautiful life.”
As if these retorts were not enough, Fox News reported that despite a huge downturn in fundraising due to the pandemic, the NRA claimed it was enrolling 1,000 new members per day since June. Moreover, Fox reported, there are plans to spend “tens of millions of dollars in battleground states” in the closing three months of the presidential campaign.
The NRA counterattack on the lawsuits offers no hint of a willingness to reform or amend its behavior. . . . For good and sufficient reasons, giving the NRA a break from dissolution serves no palpable purpose for the public.
The NRA counterattack on the lawsuits offers no hint of a willingness to reform or amend its behavior. The duty of government authority to monitor the conduct of not-for-profits has for much too long been avoided. In the instances of the Trump Foundation and the NRA, the pursuit of political activities and financial self-dealing, simply cannot be tolerated. Legally, these organizations are subject to the authority of the states wherein they are incorporated, with a coordinate responsibility to all other charitable organizations that conduct themselves with propriety in performing their missions. These organizations have been entrusted with government-approved charitable purposes, exempted from income taxes, and donors made eligible to list contributions as tax-deductible. Unlike their commercial counterparts, not-for-profits exist for the public benefit.
The Post editorial also fails to distinguish between voluntary and involuntary dissolution under state law. The flexion point seemed clear that the NRA would not voluntarily reform itself, leaving New York to commence an involuntary dissolution. In conclusion, the Post declared that it was “uncomfortable” with the New York Attorney General’s determination to seek dissolution, noting that such would require “taking” the NRA assets and distributing them to like organizations. There is no “taking” by the government but upon dissolution an agreement to distribute such assets. Finally, The Post failed to note that the financial self-dealing at the two NRA-named organization had depleted a surplus of millions of dollars into a substantial loss over three years. The majority of NRA assets are real estate.
For good and sufficient reasons, giving the NRA a break from dissolution serves no palpable purpose for the public. Whatever the motivation or thinking that led The Post to suggest that remedy must be discarded as hopeless, especially given the organization’s determined refusal to admit any wrongdoing (at least with respect to financial mismanagement) or acknowledge the public interest or the responsibility of state regulators. The suggested mercy of The Post’s position is, moreover, negated by the NRA’s response to the lawsuit. In this instance, WAPO’s general tendency to plead for a softer outcome simply fails under examination.
The Post also appears to misapprehend the traditional definition of the term dissolution. It means “the consensual or judicially ordered undoing of a contract by placing the parties back into the positions they held before entering into it.” That contract is the one of trust between a not-for-profit organization and the public.