Things have been a little quieter than usual on the NHRA front this winter, but some news made public in the last couple days regarding the series may be talked about for a long, long while.
It seems that an anonymous complaint happened across the desk of everyone’s best friend at the IRS in Washington, challenging the tax-exempt status of the organization. The complaint points out that its activities are directly in line with other automotive entertainment organizations that operate on a for-profit basis.
“Public information reveals that the NHRA operates like a commercial business by providing specific services to its members – whether in the form of prize money to winners or payments to race track operators or other private groups benefiting from the racing events,“ said Marcus S. Owens, former director of the exempt organizations division at the IRS and now a senior member in the Washington law firm Caplin & Drysdale.
Owens wrote the letter on behalf of the anonymous client, which pointed out that much of the NHRA’s $100 million-plus annual revenue is derived through cash received at its racing events; which organizations like NASCAR and the IHRA operate in a similar manner as a for-profit entity.
The letter also identifies questionable governance and compensation structures, explaining that the Association boasts 80,000 members, none of which have voting rights to elect an independent Board of Directors to approve compensation and other executive matters. Rather, the Board of Directors is chosen by an in-house committee. On their 2008 tax filings, it was noted that two of their executives earn compensation well beyond the industry standard for a non-profit.
President and Board Member Tom Compton received $771,632 in 2008, while Chairman of the Board Dallas Gardner earned $319,073 for what is said to be one hour of work a week. Compton’s salary is being compared alongside data of comparable organizations, where the average total paid to CEO’s at the ten largest associations in America was $642,447 in 2006.