Journalism startups struggle to get nonprofit designation

Council on Foundations's report details how outdated tax codes stymy donation-funded journalism

As for-profit journalism’s revenues have shrunk, nonprofit organizations have increasingly stepped up to provide local communities with the kind of investigative accountability journalism that’s become too expensive otherwise. Propublica’s probably the most well-known, but a quick look at CJR’s Guide to Online News Startups shows several smaller organizations that do similar work.

But, as the Nonprofit Media Working Group of the Council on Foundations points out in its just-released report, “The IRS and Nonprofit Media: Toward Creating a More Informed Public,” it can be unnecessarily difficult to get a nonprofit status, necessary to attract certain kinds of funding that isn’t accessible to for-profit journalism outfits.

The report follows up on a 2011 FCC study: “The Information Needs of Communities: The changing media landscape in a broadband age.” Steven Waldman, the report’s head writer, found that many of the nonprofit startups that were picking up the accountability reporting slack were running into difficulties registering with the IRS (he also posted about this on CJR in much more depth).

The Council on Foundations took his words to heart — so much so that it asked Waldman to chair its investigation.

This new report investigates how to make it easier for nonprofit media outlets (especially those focused on educational and public-good reporting) to obtain a tax-exempt status. Waldman says the group found “all sorts of things” in the IRS’s current codes that don’t take the current digital media’s needs into account, and that this could be undermining nonprofit media outlets that should qualify as 501(c)(3)s. In some cases, it took the IRS years to process tax-exempt status applications. In others, those applications were turned down because the outlet’s journalistic purpose was not considered “educational,” or it had not adequately differentiated itself from for-profit, commercial journalism organizations.

The good news, Waldman says, is that the problems are solvable — the IRS simply needs to update some of its tax codes. Waldman hopes the report will convey that to the IRS, along with how important nonprofit newsrooms are to the communities they serve. To this end, the report is accompanied by a letter signed by several journalism school deans (including Columbia’s Nick Lemann) endorsing the report’s recommendations, and FCC chairman Julius Genachowski sent a letter to Treasury Secretary Jacob Lew urging the Treasury department to “carefully consider the recommendations in this report.”

There will also be a presentation at Washington DC’s Newseum (which is being livestreamed) at 10am today.

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Sara Morrison is a former assistant editor at CJR. Follow her on Twitter @saramorrison. Tags: , ,