The net losses suffered by the Premium Cigar Association (PCA), more than doubled from 2018 to 2019, increasing from $386,018 in 2018 to $856,551 in 2019.
A preview of tax documents from the PCA gives insight into the financials of the cigar industry’s largest trade group, formerly known as the International Premium Cigar & Pipe Retailers Association (IPCPR). Topline revenue increased in 2019, up 6.7 percent to $4.94 million. Unfortunately, expenditures outpaced the revenue increase; in 2019 the organization says it spent $5.7 million, an increase of 15.6 percent compared to 2018.
These numbers come from a preview of the PCA’s 990, an annual tax form that all American tax-exempt organizations must file. Because of its tax-exempt nature, these documents are publicly available. ProPublica posted a preview of the organization’s 2019 990 form, which provides a snapshot of the organization’s finances.
The PCA’s “Program Services” revenue line item increased from $3.48 million to $3.75 million in 2019. While this data doesn’t show a further breakdown, the PCA’s 2018 tax documents showed that more than 85 percent of the “Program Services” revenue was listed as “trade show.”
“Contributions” for 2019 are listed at $727,675, more or less in line with the $738,240 generated in 2018. The PCA’s 2018 tax documents indicate that 100 percent of the “Contributions” are “Membership Dues.” Other notable sources of income are “Investment Income,” which was $167,426 in 2019, down 14.42 percent compared to 2018; and “Sale of assets” which increased from $139,300 in 2018 to $182,381 in 2019.
There’s almost nothing in this preview that indicates how the organization spent its money in 2019. The one line item that is revealed is “Other salaries and wages” which increased from $727,180 in 2018 to $884,826 in 2019.
Scott Pearce, the PCA’s executive director, did not reply to an email seeking comment about this data, including questions about the increases in expenses.
In 2019, the PCA rebranded itself from IPCPR to PCA, announced a variety of new initiatives, and announced plans for CigarCon, a consumer day at the 2020 PCA Convention & Trade Show. Ultimately, CigarCon was canceled roughly two months after it was announced after negative reactions from both retailers and manufacturers. It remains unclear how much money the organization spent on these efforts.
The other likely explanation for the organization’s increase in net losses is the ongoing lawsuit it partially funds against the U.S. Food & Drug Administration (FDA), challenging the agency’s regulations on cigars. The PCA is one of three cigar trade groups who are plaintiffs in the lawsuit, which began in late 2016.
From 2014-2016, PCA’s “Legal Fees” line item ranged between $32,000-47,000. In those three years the organization netted profits of: $723,960, $169,283 and $353,525. During those years, the organization was spending less than 1 percent of its revenue on legal fees.
In 2017, the “Legal Fees” line item increased by more than 23 times to a staggering $1.08 million, while in 2018 it was listed at $886,254.
The PCA’s revenue hasn’t increased to keep pace with the uptick in legal fees. In 2017 and 2018 the organization generated roughly $4.55 million each year, meaning legal fees accounted for 23.6 percent and 19.5 percent of the revenue generated, respectively.
Those years also marked the first time since 2011 that the PCA has failed to turn a profit. In 2017 and 2018, the organization suffered net losses of $1.22 million and $386,018.
The PCA lists its total assets as $8.86 million as of the end of 2019, slightly down from the $9.16 million in 2018. Its liabilities have also decreased, dropping from $3.59 million in 2018 to $3.32 million in 2019, leaving net assets of $5.54 million.
Neither the full form nor any information about the PCA’s 2020 finances has been posted to the IRS’ database.