I would assume that everyone that works for NHRA and gets a paycheck, pays taxes, just like anyone that gets paid.

Monte is right. It will be bad for all racers.
I have 4 tracks close by and 2 are NHRA. Hope this will not effect them.

Monte, As NHRA is not a major corporation and is now a non profit organization , Tom Compton and his cronies should be paid non profit wages. I don't care how smart you are, $700,000. wage is not average for that position. Nothing against NHRA,just pay taxes due like all the other similar businesses , and NHRA shouldn't be tax exempt.

didn't nhra sell the pro side of the business? if so how does one sell a non-profit?

I'm a NHRA member 29125 have been for many years & hope to be for many more. I look forward to my N/D and like many of us they are taking a much needed break. And being N/D is the only True Drag Racing Mag. I have now had to start reading the News paper(nothing else worth reading) waiting for my next copy.HINT HINT Mr N/D man Time to renew my N/D and get new seat belts!!! The N/D fees I don't mind,but the seat belts they are like new,not even any dust on them.The cheaper latch belts just don't cut it in a dragster.

With the economy the way it is at the present,us small time racers deserve at least some small form of a break from both NHRA & IHRA on this seat belt issue and a few more things. Maybe some of you that have plenty of $$$ that say seat belts need to be replace every time we turn around could help out some of us that can't afford that. When none of us racers can afford to race any more,it won't matter if NHRA or IHRA pays taxes any more.

I am a Racer and not a good speaker like Bob & Montie (wish I was)but I think we are looking at things wrong here.
Should we not be more concern over who's trying to sue or cause NHRA problems. It matters not if we(I like them) like NHRA or not,if they go under racing as we know it will come to a end.
If anyone causes NHRA or even IHRA any additional expenses,who do you think it will end up costing in the long run?

Just my on the seatbelt thing:
Let's hope that we never have to actually put those belts to the test when we're racing. For $69.88 to $239.95 every 2 years it's a small price to pay for something that might save your life.
What value do you put on your life?
OK it'll be opening day before we know it so let's get ready to RACE!!!

A lot of what I read is about needing to spend money on tags and belts and this and that, I've always been amazed that people CHOOSE to go that fast, CHOOSE to build a car to compete at that level then complain about the requirements of competing at that level.
Working at a drag strip when I was 16 watching grown men show up with 7 second cars and wanting to race with only a piece of canvis over the trans hump... watching grown men who claim to be as intelligent as they come want to race a 8 second car with a cage that was spot welded in... seeing the guy show up with the top sportsman car with a nitrous bottle in the cabin, no pop off valve, belts expired by a year, IHRA tag expired by a year trying to get to race down an NHRA track... throwing a fit cuz its not right that he should have to do this and that...

I can imagine some "smart" man thinking that his 18 year old 3 inch belts are perfectly fine to run, even if it has integrity issues, and its frayed around the mounting bracket.

I'm sure everyone on this board would never do anything like what I've mentioned above, BUT there are people out there like that, and with insurance rates and liability issuses, there are rules and requirements for a reason, why is it 2 years? I dont know, but I dont care you know why? Because when I choose to build my roadrunner up to the point where I need belts, I accepted that responsibility KNOWING that every 2 years I have to get them restamped or replaced.
do i think about NHRA and the money they are supposedly making? NO, I think that well this is the choice I made to race at this level.

Federal Government regulation for pilot restraint system in all model, current fighter aircraft is to be replaced every 5 years! These pilots go from 9 positive to 9 negative g's. These aircraft set in the sun on the tar mat much more thatn any of our race cars are parked or raced in the sun. Any explaination for that one? I personally asked Carl Olson that years ago in the SFI office in Rancho Bernardo. His answer, "please leave my office"!

This isn't about seat belts or even a lawsuit. This is about an ambulance-chasing law firm that is hunting for big game. They obviously stand to receive some kind of reward for turning in "tax cheats".

I am certain that the IRS has watched NHRA closely over the years. They should have no worries as long as everything is legal and documented.

Imagine if they lost their tax-exempt status, or worse yet had to pay huge back taxes. They would have no choice but to raise fees and reduce expenses to stay afloat.

I haven't run an NHRA event in 10 years, but I like going to Indy and the Sportsnationals and watching the Stock and S/S cars. I would hate to see any of that go away or become unaffordable because of greed.

Oh, and Kevin M., thanks for checking in and straightening out some errors, you have to be thick-skinned to post on these forums.

The truth of the matter is that all organizations like any business is all about the money.The bottom line is anyone who heads these enities and can bring in the big bucks gets rewarded.In any dealing there is always the grease that makes the gears work smooth.We find our economy in the toilet because of all the wheeling and dealing at the expense of all the hard working people that put their trust in the hands of those we deem successful,like our govenment,banks,investment groups,unions,insurances,retirement plans,health care and others only to find their hard earned dollars have been lost to the personal gain of a few greedy people.Gone are the days when someone could work hard and reap the rewards for their hard honest efforts and hello to the era of big organizations that will take ones hard earned dollars and wastefully spend it.After 46 years in the construction business,doing work for private companies,federal,state and local agencys such as DOT,Port Authority Transit,Army Corp of Engineers and others I have seen the waste of our dollars that would make you .What we see is just business as usual.A good analogy is "why do you think some politicians spend millions to get a job that might pay a few hundered thousand a year?"Our sport is no different,it's infested with same attitudes.

We now have a close race on the seat belt issue!!!
The racers that have to buy them....are asking only for a few more years before replacing them.

The non racers who do not have race cars,are saying no problem replace them every 2 years

I think I speak for the True Racers when I say this!!!! I am not going to buy a cheap set of belts to put in my Race-Car.Like everything else we buy the very best for our cars(has anyone that does not have these belts checked out the Quality of them lately)and therefore we buy only the best belts.If we are smart enought to build these cars, do you none racers think we are not smart enought to know if we damage one of them? You can buy a new set and cut one putting it in.Is it then still good for 2 years? If we damage our belts within a 2 year period we know to replace them.
The belts now should be good enought for 4 years.If not the SFI should not let the Company sell them to us to go in a Race-Car

I think if you check, most of the matierial for the seat belts(or in some cases, the whole set up)comes from China. So, your point about buying the best is not a valid point. Maybe we should just get the companies to purchase material in the good ol' USA and that would solve a lot of the problems.

The NHRA’s Not-For-Profit 501(c) status has been challenged by a currently unnamed entity.

On January 12, 2011, the Washington, DC-based law firm of Caplin & Drysdale, generated a letter on behalf of an anonymous client, requesting the Internal Revenue Service [IRS] investigate the NHRA’s current tax status.

Caplin & Drysdale has appointed Senior Partner Marcus Owens as the lead counsel for this action and in an exclusive interview with CompetitionPlus.com on Friday morning Owens confirmed his firm had in fact generated a letter [click here for letter] requesting the IRS’s Lois Lerner, Director of Exempt Organizations Division, investigate the 501(c) status of the NHRA.

Owens, a former IRS employee who was Director of Exempt Organizations Division from 1990 – 2000, signed the letter which cites the NHRA’s activities mimic those organized by for-profit entertainment companies such as NASCAR and the IHRA.

Owens revealed to CompetitionPlus.com his client is an amateur racer who fears backlash if his identity becomes public. Current NHRA regulations prevent any participant from competing in an event if they are in litigation with the sanctioning body. However, requesting an investigation from the IRS currently has no stipulations placed on it.

So why would Owens’ client request the investigation?

“My client is frustrated and concerned and feels like a small group has manipulated the National Hot Rod Association (to) their own personal ends as opposed to the ends of the members; as opposed to focusing on promoting the sport of drag racing,” said Owens. “[The client] feels that the organization which is a tax exempt entity is not supposed to run like a commercial enterprise, like a business with owners, and it seems to be running that way.”

The client, Owens conveyed, believes the efforts of some to improve the sport seems to be continually sabotaged by those who seek personal benefit without regard to what is in the best interests of the membership of the organization.

“The efforts [of the NHRA] to abolish the membership concept with regard to the organization is troubling to them,” Owens added.

And if you ask Owens, he’ll tell you the NHRA really doesn’t have a true “membership” by the spirit of the definition.

“The NHRA has legally no members,” he explained. “That is pursuant to existing language and its bylaws. Right now a member of the NHRA is someone who has an affinity towards the organization. It’s an affinity relationship not unlike the relationship that someone who’s a sponsor of the local symphony or the local zoo. It carries no particular privileges or rights with it that one would normally think of in terms of membership. Now for Private One C-6 purposes that category of tax exempt organization is intended to be an entity that furthers particular professions and are not supposed to be operating like a commercial entity.

“I think the concept of a member is kind of fluid on both sides here but has been construed by the NHRA to be something other than the kind of membership they had when they were first created and the members actually had a vote in what went on and what direction the organization would take.”

Owens letter to the IRS focused on various issues ranging from track ownership to top tier management compensation.

Management compensation was clearly a forefront issue. The letter points out what the client believes are salaries well above the industry standard. Owens believes NHRA President Tom Compton’s $771, 632 in taxable and non-taxable 2008 compensation was well above the average of $642,447 in 2006 for full-time compensation paid to CEOs at the ten largest trade associations in the United States. He bases his belief on the Association Compensation & Benefits Study from 2006.

In addition, the letter points out the salary paid for former NHRA President and current Chairman of the Board Dallas Gardner. According to the letter citing the 2008 Form 990, Gardner devoted 10 hours per week to NHRA in his capacity.

Owens contends that one of the requirements for tax exempt status under the Internal Revenue code is that trade associations avoid what is known as inurement. The tone of the letter insinuates the NHRA’s upper management has floated dangerously close to “inurement”.

By IRS definition, Inurement occurs when an “insider” of an exempt organization receives any of an organization’s net income or inappropriately uses any of its assets for personal gain. Any amount of inurement according to the IRS, no matter how small, can jeopardize an organization’s tax-exempt status.

“One of the requirements for tax exempt status under the Internal Revenue code is that the trade associations avoid what is called inurement. That is called a diversion of assets to somebody who is in a position of control that is something other than reasonable compensation,” said Owens. “A tax law concept that applies to both taxable and non-taxable organizations and basically it’s defined as compensation that’s above what similar organizations would pay for similar positions under similar circumstances. So it looks to the norms to have averages. It doesn’t mean that the organization can’t pay more it just has to be justified by special circumstances.

“What we’re simply pointing out here in the complaint is that there appears to be a pattern of quite handsome compensation that’s above the norms. It’s not clear whether that was justified or whether that was a diversion of money but it’s certainly above the norms. It’s something that we believe suggests that the activity of the NHRA is starting to act like more of a commercial business offering goods and services for sale to the public. We think it’s an indicator of ordinary commercial activity other than focused on promoting the health and industry of the sport.”

Owens alluded that his client doesn’t seek any financial compensation even though those who report tax offenders are typically paid a reward. The sole intention of this process, Owens says, is to change the way the organization does business in terms of their tax status.

“I think the client wants simply for the organization to be run to the benefit of the members and for the benefit of the sport and not for private entities,” Owens explained. “There’s never been any mention of that kind of thing [IRS reward] and in fact I don’t think it would be available because the information we’ve collected is essentially publicly available information. It’s just putting it together and putting it in the context of the tax law and bringing that to the attention of the IRS.

“It’s not like facts were uncovered that you and I couldn’t uncover on our own if we just spent some time digging. The criteria of gaining a reward are bringing something to the IRS’s attention that they couldn’t have found on their own.”

If the NHRA is to be found to be in violation of their not-for-profit status, penalties can range from a slap on the wrist to loss of non-profit status. In between the two are various financial penalties.

While it could appear that Owens represents a client with an ax to grind against the organization, he wants to make the point known his client only wants the best for drag racing, a sport the letter insinuates is at the mercy of a select few executives seeking personal gain.

“My client is a participant in the sport and feels like this organization isn’t helping further the standards of the sport and whether it’s moving rather dramatically into the vein of being a commercial business and that is changing the nature of the sport,” Owens contends.

With full knowledge of the letter's contents, the NHRA provided CompetitionPlus.com with a statement through VP of Communications Jerry Archambeault late Thursday evening. CompetitionPlus.com was the first and only media outlet to contact the NHRA requesting statement.

"NHRA was granted exempt status by the IRS decades ago and has operated accordingly ever since. In its annual tax returns filed with the IRS, NHRA has clearly laid out its operations. Since its formation in 1951, NHRA has operated to further its mission of preserving and promoting the sport of drag racing and improving safety in the sport. Founded by Wally Parks to provide a safer alternative to illegal street racing, NHRA -- then and now -- supports a broad range of activities from the grassroots to professional levels.

“Claims that NHRA is not operating properly are baseless and not supported by any action from the IRS."

Owens told CompetitionPlus.com that because of IRS policy regarding privacy, the only correspondence his firm will receive is a formal acknowledgement of receipt for the letter. This process generally takes three weeks.

Just because of his status as a former IRS employee, Owens doesn’t feel any more confident in the case than if he hadn’t held the position.

“I’m confident because of my knowledge of the tax law involved here but the fact that my name is on a complaint isn’t going to change the way the IRS looks at it one way or the other,” Owens confirmed. “There are an awful lot of former IRS employees working as tax lawyers and I’m sure the agency hears from them all the time. This year the work plan for the Exempt Organizations Division of the IRS is to have a closer look (at) among other things Section 501-C6 organizations.

“It’s an area that the IRS, independent of this complaint, identified as an area of high concern in regards to tax compliance. That work plan is a public document that is posted on the IRS website, the organization’s homepage.”

The bottom line, Owens concludes, his client just wants someone to see whether there’s been any wrongdoing. And this, he says, is for the betterment of the sport.

“Our client’s main concern is they want to be protected and they want to bring the facts to the attention of someone who can review them and whether or not there is a finality of a tax problem here.”



CompetitionPlus.com columnist Michael Knight, Senior Editor Jon Asher and Managing Editor Stan Creekmore all contributed to this report