Removing IRS Obstacles to Nonprofit News

But there are several features in the current tax code that make it difficult for nonprofit local news organizations to become sustainable.  These modest changes will make it much easier for them to be created and to be successful.

Problem #1: Uncertainty About Permissible Forms of Income. Nonprofit newsrooms find it difficult to create sustainable models because of prior IRS rulings. They fear they could lose their public charity  status if certain types of earned revenue like advertising, which is not deemed “public support,” becomes too significant.  Nonprofit news organizations should be free to develop earned revenue streams that enable them to achieve their charitable purpose.  Subscriptions, sponsorships,  memberships, events or pretty much anything other source of revenue should not be discouraged.

Solution: Clarify that the activities of the organization, not the types of income, determine the tax exempt eligibility of a news organization.

Language:

INCOME FROM ADVERTISING BY QUALIFIED NEWS ORGANIZATION NOT A FACTOR IN WHETHER NEWS ORGANIZATION IS QUALIFIED.  Section 501(r) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:  The sale of any commercial advertising published in any print or digital publication shall be disregarded in determining whether such publication is a qualified news organization.

And…

SPECIAL RULES FOR QUALIFIED NEWS ORGANIZATIONS – Section 170(b) of the Internal Revenue Code of 1986 is amended  by adding the following subparagraph after subparagraph after section 170(b)(1)(H) –

“(I)   In the case of a qualified news organization (as defined in section 501(r)), for purposes of applying section 170(b)(1)(vi), amounts received by such qualified news organization that are attributable to commercial advertisements shall not be taken into account, and amounts received for subscriptions, memberships or sponsorships shall be treated the same as direct or indirect contributions from the general public.

Problem #2: Uncertainty About Journalism As A Tax Exempt Purpose. The IRS has been inconsistent as to whether newspapers fulfill the charitable or educational purposes laid out in the act. This has slowed down the approval of nonprofit news organizations and/or led to questions about whether a for-profit newspaper can convert to nonprofit status.

Solution: Clarify that news organization that fulfill the other tax exempt requirements — by meeting organizational and operational requirements — will  be considered legitimate tax exempt organizations by the IRS..

Suggested statutory language:

Section 501(c)(3) of the Internal Revenue Code of 1986 is amended by inserting “or to publish a qualified news organization,” after “educational purposes.”

QUALIFIED NEWS ORGANIZATION.— Section 501 of the Internal Revenue Code of 1986 is amended-

1. by redesignating subsection (r) as subsection (s), and by inserting after subsection (q) the following new subsection:

“(r)    Qualified News Organization – For purposes of this title, the term “qualified news organization” shall mean any print or digital publication if the primary content of such publication is news and current events

DEDUCTION FOR CHARITABLE CONTRIBUTIONS – Subparagraph (2)(B) of section 170(c) of the Internal Revenue Code of 1986 is amended by inserting after “educational purposes,” “or to publish a qualified news organization.”