The internet got a little jolt of joy when the news broke late Friday that the National Rifle Association is filing for bankruptcy. Liberals celebrated what appeared to be the downfall of a major political opponent. After all, the NRA has long dumped money into lawmakers’ arms in exchange for lax gun control and a restriction that keeps the government from even investigating whether gun control measures would improve safety.
All this continues to contribute to the misconception that Americans have about bankruptcy. We tend to view bankruptcy as meaning no more money. When businesses go bankrupt, like retailer JCPenney did last year, there’s a belief that they’re going out of business completely. But that’s not how it works.
Instead, bankruptcy is a process that allows an organization to renegotiate its debts. That’s what the NRA wants, because it plans to change its incorporation from New York to Texas. That move is sparked by an announcement last year that the State of New York was filing a lawsuit to dissolve the NRA for violating New York laws on nonprofit organizations.
New York Attorney General Letitia James says the NRA uses its tax-exempt nonprofit status to line the pockets of its executives. That’s actually not totally illegal in the U.S., where nonprofits operate with less oversight than in many other countries, but nonprofits are required to pay taxes on unrelated business activities – things that aren’t directly related to their primary purpose. That’s where James says the NRA messed up.
Pivotally, James says, the NRA spent money on lavish gifts to silence potential opponents, as well as on its CEO, Wayne LaPierre.
By filing for bankruptcy, the NRA is hoping to reorganize itself into a Texas-based nonprofit, which would free it from what it calls New York’s “corrupt political and regulatory environment” and put it under the oversight of the gun-friendly Lone Star state. As it would no longer be New York-based, it would not be subject to New York state regulators. Without bankruptcy, it can’t dissolve its New York charter, since its under active investigation in the state.
James says the move won’t work. “We will continue our efforts because this organization has gone unchecked for years, and it’s critically important that we continue to hold them accountable, even in bankruptcy court.”
This isn’t to say that the NRA doesn’t have financial problems. The NRA has reportedly spent $100 million on legal fees since 2018 and is at least $10 million in debt; shedding some of that debt is essential to the organization’s future success. It claims to have around 5 million members in the U.S., about 1.5% of all Americans, a number that has been flat for several years as the NRA faces criticism about its role in gun violence in the U.S., particularly in schools.
A bankruptcy judge will consider the NRA’s case and determine how to proceed. James says her office is confident it will ultimately obtain a judgement against the NRA.