Federal bill would ease the way for nonprofit local news

A bill filed by U.S. Rep. Mark DeSaulnier, D-Calif., would make it easier for “written news organizations” to claim nonprofit status, “allowing them to focus on content instead of profit margins and reduce their tax burden.”

The bill, H.R. 3126, has been endorsed by the News Media Alliance, the National Newspaper Association, the American Society of News Editors, the Associated Press Media Editors, the Association of Alternative Newsmedia, the California News Publishers Association, Free Press Action and the Open Markets Institute.

Nonprofit news is nothing new — organizations ranging from public media to hyperlocal community websites have nonprofit status. Donors are able to write off contributions, and the news organizations themselves are exempt from most taxes.

But it’s not easy. Back in 2013, I wrote that the IRS had virtually stopped granting 501(c)(3) nonprofit status to startup news organizations as it wrestled with the question of whether journalism was among the educational activities envisioned under the tax code.

Though it’s my understanding that the agency has loosened up since then, questions remain. For instance, The Salt Lake Tribune recently announced that it would seek nonprofit status, which would make it the first regional newspaper to do so. Writing at the Nieman Lab, though, Christine Schmidt and Joshua Benton wondered whether the Tribune would run into trouble for its coverage of professional sports and the restaurant scene, which would appear to fall outside the IRS guidelines.

On the other hand, Paul Bass, the founder of the New Haven Independent, a 13-year-old nonprofit news project, told me recently that the only guidance he ever received was that the Independent could not endorse political candidates or lobby the government.

Presumably DeSaulnier’s bill will help clear up those issues. And a personal note: I played a very small role in crafting the legislation. DeSaulnier and I discussed his ideas last fall, and I suggested to his office — unsuccessfully — that the bill not be restricted to “written” forms of journalism.

The legislation is one of two stories in the news right now about the future of local journalism. The other is a proposal by the newspaper industry to suspend antitrust laws so that they may negotiate collectively with social media platforms in an attempt to obtain payment for the use of their content.

The News Media Alliance, the newspaper business’ principal lobbying group, released a study this week claiming that Google and Facebook made $4.7 billion in 2018 through its uncompensated use of material that originally was published on newspaper websites.

You can read the full text of Rep. DeSaulnier’s bill to encourage nonprofit journalism by clicking here. The text of his office’s press release is below.

June 6, 2019 | Press Release

Washington, DC – Today, Congressman Mark DeSaulnier (CA-11) announced the introduction of the Saving Local News Act (H.R. 3126), a bill to recognize newspapers as a public good and make it easier for written news organizations to become non-profits – allowing them to focus on content instead of profit margins and reduce their tax burden. The bill is supported by the News Media Alliance, the National Newspaper Association, the American Society of News Editors, the Associated Press Media Editors, the Association of Alternative Newsmedia, the California News Publishers Association, Free Press Action, and the Open Markets Institute.

“Local journalism has been a bedrock of American society for over 200 years. I remember when dedicated reporters sat in the front row of city council meetings to keep communities informed and to increase accountability. Today many local newspapers are dying out – penny pinching until they close or are bought up and sold off piecemeal by hedge funds. This bill would allow papers to renew their focus on quality content and flourish unencumbered by ever-increasing demands for greater profits,” said Congressman DeSaulnier.

“We commend Congressman DeSaulnier for introducing this important piece of legislation that recognizes the importance of nonprofit journalism to the American society. At a time when news deserts are a growing concern, we must ensure that we support all newsrooms in their efforts to provide high-quality journalism to their local communities. This journalism bill that would allow non-profit newsrooms to treat advertising revenue as nontaxable income could be helpful to a number of publishers,” said David Chavern, President and CEO, News Media Alliance.

“News organizations today must explore a wide array of avenues for sustainability, one of them being non-profit status. But the federal law lays many trip wires along this path, including the way advertising is taxed. The non-profit route could be attractive for some newspapers if and only if Congress recognizes that even a non-profit newspaper still needs good revenue sources. This proposal by Congressman DeSaulnier will open up new possibilities for sustaining quality journalism in American communities. We appreciate the concept and, even more, we welcome the interest from an important member of Congress in helping newspapers that are at risk to survive,” said Andrew Johnson, President, National Newspaper Association.

“This legislation carries the promise of helping news outlets large and small, in big cities and small towns, throughout the country. It will allow for innovation into new models of journalism and carries significant potential to address the growing problem of ‘news deserts’ around the country where the for-profit model is not sustainable,” said Angie Muhs, President, Associated Press Media Editors.

“The nonprofit model of journalism may well be one viable future of journalism, at least where smaller publications are involved. This is a constant topic of discussion among our membership which is why our organization welcomes this legislation as a means of increasing the likelihood that those who choose can convert themselves to non-profit status, while maintaining a strong journalistic enterprise,” said Molly Willmott, President, Association of Alternative Newsmedia.

“At a time when editors around the country continue to see newsrooms shrink in the face of financial constraints, we welcome every avenue to greater revenue. This legislation offers significant assistance that will allow news organizations to survive without constraining their actual journalism in any way,” said Nancy Barnes, President, American Society of News Editors.

“Community newspapers are woven into the fabric of American society and provide accurate and trusted information that improves the lives of individuals in the communities they serve. It is no secret that newspapers face an increasing number of existential threats from online competitors which have left them with a decreasing number of revenue opportunities. This measure would provide news organizations with the means to better rise to these challenges and continue to play a vital role in their communities by holding the feet of the powerful to the fire and giving voice to the powerless,” said Jim Ewert, General Counsel, California News Publishers Association.

Since 2017, estimated daily newspaper circulation fell 11 percent from the previous year (Pew Research Center). Congressman DeSaulnier recently established a working group of dedicated Members of Congress from areas affected by a drought of high-quality journalism. Together they have been working to highlight this crisis and bring attention to the need to promote local journalism, including by holding a Special Order on the floor of the U.S. House of Representatives and introducing the Journalism Competition and Preservation Act (H.R. 2054), a bill to create a temporary safe harbor from anti-trust laws to allow news organizations to join together to negotiate with dominant online platforms to get a fair share of advertising profits.

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Can nonprofit ownership be an answer to the crisis facing local newspapers?

Photo (cc) 2004 by Cool Hand Luke.

Previously published at WGBHNews.org.

A little gallows humor seems like an appropriate way to greet the news that The Salt Lake Tribune — the largest daily newspaper in Utah — will seek permission from the IRS to become a nonprofit entity. So cue the snare drum:

Q: What’s the difference between a for-profit newspaper and a nonprofit newspaper?

A: A nonprofit newspaper might actually be able to figure out a way to make money.

Hiyo!

But hold the snark. Because even though nonprofit status would not relieve the Tribune of the obligation to figure out a way to pay for the journalism it provides, this might be the most hopeful step in newspaper ownership since The Philadelphia Inquirer and its sister properties were donated to a nonprofit foundation in 2016.

The Salt Lake plan would actually take the Philadelphia model one giant step further. The Inquirer remains a for-profit paper even though its owner, the Lenfest Institute for Journalism, is a nonprofit organization. What the owners in Salt Lake hope to do is reorganize the Tribune itself as a nonprofit, enabling it to raise money in the form of tax-exempt contributions from large foundations as well as from (to borrow a phrase) readers like you.

“The Tribune is a vital community asset and should be owned by the community,” said publisher Paul Huntsman, the brother of former ambassador and presidential candidate Jon Huntsman.

The slide at daily newspapers everywhere has been precipitous, but it’s been especially acute at the Tribune. The newsroom has plunged from 148 full-time employees in 2011 to about 60 today. (Huntsman bought the paper in 2016 and eliminated more than 30 positions a year ago.) Print circulation, according to the Nieman Lab, fell from 85,000 in 2014 to just 31,000 in 2018.

The situation in Salt Lake City is complicated by the Tribune’s joint operating agreement with a second daily, the Deseret News, which is owned by the Church of Jesus Christ of Latter-day Saints. That agreement expires in a year. So it will take a while for the dust to settle.

Despite the success of our three national papers, The New York Times, The Washington Post, and The Wall Street Journal, in charging for digital subscriptions, the outlook remains dire at the regional level. Although Boston Globe owner John Henry surprised everyone last December when he said his paper had achieved profitability, the Globe’s financial situation is still murky. Elsewhere it’s Armageddon. As The Wall Street Journal put it in a recent examination of local newspapers: “A stark divide has emerged between a handful of national players that have managed to stabilize their businesses and local outlets for which time is running out.”

As the advertising revenues that traditionally subsidized journalism have dwindled, newspapers are looking more and more like what economists refer to as a “public good” — that is, a service that benefits all of us whether we pay for it or not. The fire department is a classic example of a public good because we all need it, yet few of us would pay for it voluntarily. That’s what taxes are for. But what do we do about a newspaper whose exposé of corruption in city hall, for example, benefits “free riders” who don’t pay as well as those who do?

That’s where the nonprofit model comes in. At its best, nonprofit ownership can break the reliance on revenue from advertisers and readers by getting others to pay for it.

Take, for instance, the New Haven Independent, a nonprofit, online-only news service that has received considerable support from the Community Foundation for Greater New Haven since the Independent’s founding in 2005.

“My view is that one of the things that connects people is a common base of information about what’s going on in this place. That it’s actually a very powerful connector,” the foundation’s president and chief executive officer, Will Ginsberg, said in an interview for my 2013 book “The Wired City.” “And it’s therefore a very powerful ingredient in creating a sense of community.”

From the moment that the internet began undermining the economics of journalism, the paramount question for newspapers has been: Who will pay? If The Salt Lake Tribune is successful in winning IRS approval, we’ll have a chance to see if civic-minded foundation leaders and philanthropists might be one answer. It’s already working at smaller projects such as the New Haven Independent and at public broadcasting operations. It’s worth finding out if it might work for large regional newspapers as well.

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