The Rodeo – Where’s the Money? – Toni Denis

Every summer, during the week of July 4th, about 4,000 spectators attend each of several events at Prescott’s annual “World’s Oldest Rodeo.” They and other taxpayers may be aware of the controversies surrounding a $15.3 million state appropriation to the rodeo, and they may be aware that the rodeo is paying only $1 a year for 30 acres of land and buildings it leases from the City of Prescott. But few people are aware of the many serious irregularities in the rodeo’s finances.

Greg Mengarelli was mayor of Prescott back in 2020. Around the end of that year, he approached a city tenant, Prescott Frontier Days (PFD), and suggested that they expand their activities on the Rodeo Grounds which they were leasing from the city. He stated that to expand activities, it would be best for PFD to hire a Business Development Manager, and Mengarelli said he was available for the job. This was verified by Mengarelli himself when he wrote in the June 20, 2021, Prescott Daily Courier: “I approached the PFD leadership with a vision to improve the infrastructure of the rodeo grounds and to expand its interaction with the community.” After Mengarelli was hired by PFD and the background of the hiring was understood by the public, many people considered Mengarelli’s action to be an abuse of his position as mayor.

In 2021, when the rodeo operator, Prescott Frontier Days (PFD), decided to raise money to upgrade the rodeo facilities it rents from Prescott, it applied to IRS for status as a 501(c)(3) charitable nonprofit. The IRS rejected PFD’s application, saying a rodeo is not a charitable purpose. Instead, IRS classified PFD as a 501(c)(4), “nonprofit social welfare organization.” The difference is that a 501(c)(4) doesn’t have a charitable purpose. Thus, donations to PFD are not tax-deductible.

Also in 2021, IRS approved a separate PFD charitable arm, Prescott Frontier Days Foundation. In the Foundation’s tax filing for that year it stated its primary exempt purpose was “support of world’s oldest rodeo” and listed under expenses “purchase of equipment and repairs of rodeo grounds.” Those expenditures appear to be outside of what is allowed for a charitable organization.

In 2022, PFD applied to the IRS for the approval of another charitable nonprofit, the 1888 Buckle Club. In that application, the incorporators stated:

“The 1888 Buckle Club, Inc. (Buckle Club) was organized to raise financial support for Prescott Frontier Days, Inc. (Prescott Frontier Days, EIN 95-3382739), a 501(c)(4) organization that operates the World’s Oldest Rodeo (the Rodeo) in Prescott, Arizona. The Buckle Club seeks to raise public funds to issue to Prescott Frontier Days to use in improving the Prescott Rodeo grounds infrastructure and increasing the overall rodeo experiences for both spectators and contestants.”

On its face, this purpose does not appear to be charitable in nature at all. The IRS examiner must have thought the same, as the examiner required the Buckle Club to declare in a follow-up submission, under penalty of perjury, that the Buckle Club would assure that in the future all funding going to PFD would be for charitable purposes. The Buckle Club so declared.

In addition, the Buckle Club’s bylaws state that it was “created with the express purpose of supporting the Prescott Frontier Days®, Inc. & World’s Oldest Rodeo® in reaching their goals to improve the Prescott Rodeo grounds and increase the overall experiences for spectators and contestants alike.” PFD already knew that an organization whose purpose was putting on rodeos cannot be charitable. But through the Buckle Club and Foundation, PFD appears to be trying to do what IRS said charitable organizations cannot do.

When the Buckle Club applied to the IRS for charitable status, it stated “memberships are offered to individuals who commit to a three year membership with annual dues in the amount of $5000.” The Buckle Club also stated they expected revenue in 2022 to be $500,000. But in 2023 they reported their actual 2022 revenue as less than $50,000. The reason for the precipitous drop is now clear: In the Buckle Club bylaws, members’ dues were stated as different than what was presented to IRS. The bylaws say dues are “$5,000 annually, including a $500 fee to PFD and a $4,500 donation to the Prescott Frontier Days Foundation.” The Foundation, as did the Buckle Club, reported their 2022 revenue was below $50,000.

According to an attorney who has specialized in the law of tax-exempt organizations for over 30 years: “If the Foundation or Club simply granted such a large amount to the Rodeo, which has only a minimal amount of charitable activities (like the Youth Rodeo), then the grantor nonprofit organization would be acting in serious violation of IRS regulations and, if audited by the IRS, the IRS would revoke their 501(c)(3) organization status, possibly retroactively.  In addition, the IRS would disallow claimed charitable contribution deductions made to the Foundation or Club by directors or other insiders of either the Club, Foundation, or of PFD.”

In the “Welcome” section on their website dated 2023, Greg Mengarelli, PFD’s Business Development Manager and initiator and director of the Buckle Club, noted that at that time the club has “more than 75 members.” The Club stated that the number of members would be capped at 100. So the Buckle Club is presumably raising $5,000 annually from each member for a total of up to $500,000 each year. The big question is: Where will this large amount of money go, or where has it gone? If the Buckle Club or Foundation can’t legally spend it on the Rodeo, what can they do with the money?

Based on the publicly available plans for an exclusive club building and special VIP parking for members on rodeo grounds, it’s obvious that the Buckle Club would operate as a private club for the benefit of its members and as a means of funneling money to the rodeo renovation—which would be fine for a private corporation, but not for a charitable nonprofit. Also, it’s problematic considering the proposed building would be on city-owned land, but not accessible to members of the public.

No response was received after leaving a phone message to the treasurer of the Buckle Club, Daniel Yamauchi. A previous request for an interview with a PFD representative also had no response. So, full transparency regarding the finances of both PFD and the Buckle Club has not been forthcoming. None of the three organizations’ financial reports for 2023 have been released to the public yet.