Nonprofit News and the Tax Man : CJR
The future of nonprofit news organizations has hit an unexpected roadblock in the agency that determines their tax-exempt status: The Internal Revenue Service.
Nonprofit news organizations applying for tax-exempt status are running into long delays as the IRS bundles them together as “precedential” and studies whether they qualify for the status under 501(c)(3). While animal protection and “fostering national or international amateur sports competition” are tax-exempt activities listed in the 501(c)(3) statute, journalism is not, and the agency’s historical position has been that newspapers or similar publications are commercial enterprises.
Consider the San Francisco Public Press.
The newspaper doesn’t accept advertising. It’s run by volunteers and has no salaried employees. It covers local public policy issues and eschews sports, entertainment news, and restaurant reviews. It loses money and is subsidized by donations and foundation grants.
But the IRS got the paper’s application nearly two years ago and still hasn’t given it an answer.
At least three other nonprofit news startups are also caught up in yearlong IRS delays, making the odds faced by the fledgling publications even longer.
And one former director of the exempt-organizations division at the IRS says the agency seems to be leaning toward the position that traditional news doesn’t qualify as a tax-exempt activity.
An IRS spokeswoman won’t comment on what exactly the agency is reviewing or how long it might take to issue its determination, but says nonprofit-news applications “have been centralized for consistency and are being worked in our DC office.”
As Steve Beatty, managing editor of New Orleans investigative startup The Lens, which applied more than a year ago, puts it, “We’ve been told our application will be reviewed up to the right hand of God.”