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June 2, 2020

How Dues are Spent at the National Automobile Dealers Association (NADA)

by Anne Paddock

The National Automobile Dealers Association is a non-profit tax-exempt 501 (c) (6) – a professional trade association – representing automobile dealers (members) on legislative and regulatory matters in Congress and other government entities and as an intermediary with car manufacturers. In addition, NADA provides educational information to its members on legal, legislative, and regulatory issues.

Based in Tysons, Virginia, NADA also has 5 related entities operating out of the same office:

  • NADA PAC:  A political action committee whose primary activity is lobbying. A 527 tax-exempt organization, NADA PAC is directly controlled by NADA.
  • NADA Employee Health Benefit Plan:  A healthcare tax-exempt 501 (c) (9) – an voluntary employees’ beneficiary association organized to pay sick and/or other benefits to members or their dependents. Direct controlling entity is NADA.
  • NADA Services Corporation:  A real estate leasing corporation (taxable) domiciled in Delaware owned 100% by NADA. In 2017, NADA Services Corporation had $5.3 million in income and $25 million in assets.
  • NADA Retirement Administrators Inc:  An administrative corporation (taxable) domiciled in Delaware owned 100% by NADA. In 2017, the NADA Retirement Administrators Inc posted a loss of $245,000 and had $1.5 million in assets. This organization is controlled by NADA Services Corporation.
  • NAISA: A Delaware corporation engaged in insurance, directly controlled by NADA Services Corporation.

Annual dues are $400 – $1,500 based on the annual sales volume of the member and only accounted for $5.9 million of total revenue ($90 million) of NADA in 2017.  With an estimated 16,000 members, the average annual membership is $370  which appears to indicate there are less than 16,000 members since the average is less than the lowest annual dues. But, what is particularly important to note is how little membership dues ($5.9 million) account for relative to total revenue ($90 million) for a trade association. As such, the sources of all revenue and how the revenue was spent will be analyzed below:

Total revenue of $90 million came primarily from 8 sources:

  • $19.8 million (22% of revenue):  Gains on the Sale of Assets
  • $17.8 million (20% of revenue):  Convention and Exposition
  • $16.8 million (19% of revenue):  Management Services
  • $14.5 million (16% of revenue):  Investment Income
  • $ 8.2 million (9% of revenue):  Royalties
  • $ 5.9 million (6% of revenue):  Membership Dues
  • $ 2.8 million (3% of revenue):  Sponsorships and Advertising
  • $ 2.5 million (3% of revenue):  Education and Training
  • $ 1.8 million (2% of revenue):  Net Rental Income

As illustrated above, the 4 largest sources of revenue were gains on the sale of assets, convention and exposition fees, management services, and investment income.

Expenses totaled $75 million and were allocated as follows:

  • $22 million (24% of revenue):  Compensation
  • $11 million (12% of revenue):  Corporate Overhead (no detail provided)
  • $10 million (11% of revenue):  Travel and Conferences
  • $ 9 million (10% of revenue):  Office-related Expenses
  • $ 9 million (10% of revenue):  Real Estate Expenses (no detail provided)
  • $ 5 million (6% of revenue):  Fees for Services (primarily other with no detail provided)
  • $ 5 million (6% of revenue):  Equipment Rental
  • $ 2 million (2% of revenue):  Other (no detail provided)
  • $ 1 million (1% of revenue):  Advertising and Promotion
  • $ 1 million (1% of revenue):  Other Expenses (payments to affiliates, taxes, etc)

As illustrated above, the largest expense for NADA is compensation for the 165 employees who received $22 million, which equates to an average compensation of $133,000.  The second largest expenses was corporate overhead ($11 million) which was not detailed.  Travel and Conferences cost $10 million (although equipment rental could be part of these expenses. Detail on the equipment rental was not specified but in trade associations, often times equipment rental is for conferences).

Fees for Services were $5 million with most ($3.8 million) with no detail provided. The remainder was for legal and investment and management fees.

In summation, there are a lot of expenses with no detail provided.

Using the above information, every $100 in revenue was spent as follows:

$100:  Revenue

-$ 24:  Compensation

-$ 12:  Corporate Overhead

-$ 11:  Travel and Conferences

-$ 10:  Office-related Expenses

-$ 10:  Real Estate Expenses

-$  6:  Fees for Service

-$  6:  Equipment Rental

-$  2:  Other Expenses

-$  1:  Advertising and Promotion

-$  1:  Other Expenses (payments to affiliates, taxes, etc)

-$ 83:  Total Expenses

 $ 17:  Revenue Unspent: To General Fund

As illustrated above, NADA spent $83 out of every $100 on expenses. $17 of every $100 was unspent (for a total of $15 million) and allocated to the general fund (or what some people refer to as the endowment) which had $252 million at year-end.

To read the IRS Form 990 (2017), click here.

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