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Nonprofit newspaper model needs work

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 [Editor’s note: A longer version of this article appeared in The Cohen Report, a publication of The Nonprofit Quarterly.]

Rick Cohen

Rick Cohen

Rick Cohen

Is the conversion of a for-profit newspaper to a 501(c)3 public charity an answer for the future survival of newspapers?

Will legislation introduced by U.S. Senator Ben Cardin of Maryland and U.S. Rep. Carolyn Maloney of New York, both Democrats, help newspapers find their way to becoming nonprofits?

Plenty of for-profit newspapers are foundering or have tanked this past year.

Reporters and others have discussed the possibility of nonprofit angels or nonprofit models to rescue or own and manage some of the papers.

Would Cardin’s bill possibly save these papers?

The legislation doesn’t appear to be making much headway on Capitol Hill . Cardin has one co-sponsor in the Senate, and a companion bill introduced by Maloney similarly has attracted only one person to join her.

Cardin’s bill would allow newspapers under some circumstances to operate as educational nonprofits, with advertising and subscription revenue being tax-exempt, making these nonprofit-like newspapers eligible to tax-deductible charitable and philanthropic contributions.

To qualify, the newspapers would need to follow a “methodology generally accepted as educational” in preparing their material, and they would not be allowed to make political endorsements.

Such tax-exempt newspapers would have to ensure the amount of space devoted to advertising did not exceed the space devoted to “educational content.”

The benefits to a newspaper are simple and obvious — eligibility for foundation grants and program-related investments, and for U.S. Postal Service nonprofit postage rates.

Is there a downside to the bill?

Paul Starr of Princeton University’s Woodrow Wilson School of Public and International Affairs offered a perspective about how to look at questions concerning the press.

Because U.S. democracy is so dependent on a functioning press, he suggested, newspapers could not be compared to other industries regarding questions of subsidy, whether governmental cash or infusions of charitable and philanthropic giving.

He said any subsidies should not favor one viewpoint over another, or print media over online media and should be neutral or at least reasonably balanced as to organizational form.”

Starr obviously knows the meddling, controlling nature of foundation grantmakers.

He called for a government subsidy, such as an exemption from the payroll tax, that would be “platform-neutral,” that is, available to all forms of journalism, not just print newspapers.

The right wing has savaged the Cardin bill as a “government bailout” of the newspaper industry.

It’s not; there’s no money in this bill.

But the brevity of the bill, making one think it is more of a “statement” bill expressing concern than a bill with a workable solution, raises a number of questions:

Who gets assisted?

Cardin’s staff say the bill intends to provide nonprofit status to locally-owned newspapers, as opposed to newspaper conglomerates.

Does a local paper owned by a chain get to go nonprofit but other papers in that chain fail to qualify?

The skimpy text in the bill makes you think the big press corporations will be licking their chops. You know they’ll find the loopholes here.

Cardin’s bill includes nothing that would prohibit newspaper fat-cats from taking mammoth salaries from nonprofit operating costs, as opposed to profits.

If newspapers convert to charitable status, what salary levels might be considered too high?

Newspapers traditionally take political positions and advocate forcefully for legislation.

But IRS code limitations on nonprofit lobbying regarding legislation, taking positions on candidates for electoral office, and publishing statements on behalf of candidates for public office could put many nonprofit newspapers in a bind.

Cardin’s press focus is limited to ink-on-paper journalism, but media coverage of the news is much more diverse than printed newspapers.

The lack of platform-neutrality in the Cardin bill makes it feel sentimental rather than practical, an attempt to improve on the buggy whip when the nation is tapping other, more diverse and modern modes of transportation-or in this case, journalism.

The Cardin bill may be the starting point for a national conversation about whether and how to save newspapers, but it is not the comprehensive answer.


Rick Cohen is national correspondent for The Nonprofit Quarterly and a regular contributor to Philanthropy Journal.

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