The payroll tax credit explained

The payroll tax credit for local news came within two Senate votes of being passed into law. The provision was originally introduced with the Local Journalism Sustainability Act, a bipartisan piece of policy that would support local newsrooms via a series of tax credits.

The payroll tax credit was singled out as particularly beneficial to newsrooms and included in Build Back Better. The language passed in the House version of the bill would provide a direct benefit to newsrooms for five years, while using an innovative set of quality controls to exclude bad actors.

Here’s how it would work

The Benefit: Newsrooms get a refundable tax credit for five years, a cash benefit, of up to $25,000 in the first year and $15,000 in years two through five for each full-time local journalist. The benefit amounts to 50% of a local journalist’s compensation up to a $50,000 salary in the first year, and 30% of the salary in the last four years. That means a newsroom could see as much as $85,000 per journalist over the length of the bill.

Who Qualifies: The provision would benefit newspapers, digital-only publications and broadcasters alike. Based on the language that was included in Build Back Better, outlets would need to have at least one full-time journalist on staff who lives within a certain area of the outlets coverage area and contributes to the production of journalism Outlets would also need to disclose their ownership, have media liability insurance and publish at least once a year. Most importantly, outlets cannot not be owned or majority funded by political action committees or 501c4 organizations. This requirement combined with the requirement that a publication have at least one journalist on staff acts as a major deterrent to pink slime publications benefiting from the provision.

Who is considered a local journalist: A full-time employee engaged in the “gathering, preparing, directing the recording of, producing, collecting, photographing, recording, writing, editing, reporting, presenting, or publishing original local community news for dissemination to the local community”

The Impact: Because the provision is a tax entitlement, publications who met the qualifying factors would have to do little else to receive the benefit. And because outlets would benefit on a per-employee basis, there is a soft incentive for publications to maintain or grow their staff. By gross numbers, larger publications would benefit at a higher rate than smaller publications, but because the provision caps the overall number of employees outlets could receive benefits on, large newspaper chains like Gannett would not be able to receive the benefit on all of its employees. Moreover, when we asked the Afro-American, a historic Black newspaper in Baltimore and Washington, D.C. what it would do with the benefit if the provision became law, newsroom leaders said they would double their reporting staff, showing the potential exponential benefits of the bill.

For more information: You can read the full provision here.