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StacyAdelmanSecondPaper 8 - 05 Jan 2012 - Main.StacyAdelman
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> | READY FOR REVIEW | | | Destructive Creation: Journalism and the Internet
The day that I run into a Huffington Post reporter at a Baltimore zoning board hearing is the day that I will be confident that we have reached some sort of equilibrium. -- David Simon | | | The Creation
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< | (1) 501(c)(3) Status. 501(c)(3) organizations are non-profit ventures exempt from federal corporate tax ("unrelated business income," such as revenue from advertising, is taxable). In return for no longer being enslaved to a profit margin, publishing activities are confined to those that "further the exempt purpose": keeping the community abreast of crucial issues. Candidate endorsement is be prohibited, but 501(c)(3)s are still be able to publish and participate in the discussion of elections and political issues. As of now, newspapers are not technically able to apply for 501(c)(3) status, but the loophole lies in applying as an "investigative news organization" that put out papers. The Voice of San Diego? is one such entity. There was an effort in 2009 to make certification nearly automatic for newspapers, but the Newspaper Revitalization Bill has yet to be enacted. | >
> | (1) 501(c)(3) Status. 501(c)(3) organizations are non-profit ventures exempt from federal corporate tax ("unrelated business income," such as revenue from advertising, is taxable). In return for no longer being enslaved to a profit margin, publishing activities are confined to those that "further the exempt purpose": keeping the community abreast of crucial issues. Candidate endorsement is be prohibited, but 501(c)(3)s are still be able to publish and participate in the discussion of elections and political issues. Some have worried that 501(c)(3) status could lead to a backdoor fairness doctrine, with people complaining to the IRS about a given paper's "partisan" leanings. Additionally, distribution needs to be notably different from ordinary commercial publishing practices. Typically, this is demonstrated by production and distribution without regard for profit, such as pricing at or below cost. As of now, newspapers are not technically able to apply for 501(c)(3) status, but the loophole lies in applying as an "investigative news organization" that publish articles. The Voice of San Diego is one such entity. There was an effort in 2009 to make certification nearly automatic for newspapers, but the Newspaper Revitalization Bill has yet to be enacted. | | | (2) L3C Status. Low profit limited liability company (L3C) model is an intermediate structure between the poles of for-profit and non-profit systems. L3Cs are taxable for-profit businesses, but, by law, they must place their charitable mission/community service goals ahead of profits. This model is likely to appeal to many more newspapers than the 501(c)(3) model because the LLC structure can remain intact (i.e., owners exist, profits can still be distributed, etc.). L3Cs derive their sustainability from program related investments (PRIs), loans made by private foundations for specific goals that are low-yielding, but tax deductible and in line with the IRS's charitable giving requirements. Because the probable investors are local, this reorients newspapers' mission to community service. In June 2010, Vermont's Point Reyes Light became the first newspaper successfully converted to an L3C. There are obvious drawbacks to this model. Because the structure remains almost entirely indistinguishable from an ordinary corporation, L3Cs can get away with being little more than an LLC with an organizational promise. The creation of L3Cs must be authorized by an amendment to the state's (or the country's) General Limited Liability Company Act; only a handful of states have done so, likely because, historically, newspapers have not been recognized as non-profits. Additionally, attracting donations depends on the supply of investors satisfied with reaping high social dividends rather than any substantial financial ones. |
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