The IRS should change how it decides whether to grant tax-exempt status to news nonprofits, says a report released Monday morning by the Council on Foundations.
The current system presents "serious and unnecessary obstacles to critical innovation," says the report, which was funded by the Knight Foundation.
News nonprofits have particularly struggled to become designated as 501(c)(3) organizations -- a tax-exempt status that most major foundations prefer their beneficiaries have -- because of rules the report says have "not been updated for the digital age." The Chicago News Cooperative, for example, cited its inability to vault the IRS' restrictions as one of the reasons it shut down last February.
Those hurdles are especially dangerous, the report argues, because news nonprofits often fill a void left by the cratering newspaper industry. A 2011 FCC report by Steven Waldman, who also chaired the group that produced the new report, pointed to the important role nonprofits could play when local news and investigative journalism, for instance, fall victim to budget cuts.
Among the obstacles the report says should be fixed: The IRS should reconsider its definition of journalism:
The IRS has taken the position in several cases that journalism is not educational. This position is inconsistent with the applicable federal tax regulations, which define "educational" as "the instruction of the public on subjects useful to the individual and beneficial to the community."(more...)