Toward Creating a More Informed Public
What is nonprofit media?
Nonprofit media groups are organizations that seek 501(c)(3) tax-exempt status as public charities. These diverse organizations serve a valuable role in educating citizens through in-depth public interest reporting, including investigative journalism, news reports, explanatory journalism, solutions journalism, and specialty journalism, in order to elevate important social topics, particularly at the local level.
How is the Council involved?
Supported by a grant from the John S. and James L. Knight Foundation, the Council is supporting those working with the IRS in an effort to obtain clear guidance on the tax-exempt application process for nonprofit media groups that seek 501(c)(3) status. With the support of the Knight Foundation, in 2012 the Council convened a group of leaders from the foundation and tax-exempt media sector to meet over the course of a year and engage on the challenges and opportunities presented by nonprofit media. On March 4, 2013, this group released a report entitled The IRS and Nonprofit Media: Toward Creating a More Informed Public. The report had five key findings about IRS treatment of these emerging organizations:
- Applications for tax-exempt status are processed inconsistently and take too long;
- The IRS approach appears to undervalue journalism;
- The IRS approach appears to inhibit the long-term sustainability of tax-exempt media organizations;
- Confusion may be inhibiting nonprofit entrepreneurs trying to address the information needs of communities; and
- The IRS approach does not sufficiently recognize the change nature of digital media.
To address some of these concerns, the report recommended the following:
- The IRS methodology for analyzing whether a media organization qualifies for exemption should not take into account irrelevant operational similarities to for-profits;
- The IRS should focus on whether the media organization is engaged primarily in educational activities that provide a community benefit, as opposed to advancing private interests, and whether it is organized and managed as a nonprofit, tax-exempt organization;
- News and journalism do count as “educational” under the tax-exempt rules;
- The IRS should maintain the key structural requirements for being a tax-exempt media organization that properly distinguish it from a commercial enterprise, such as: it cannot have shareholders or investors, it must have a governing board that is independent of private interests, and it cannot endorse candidates or lobby lawmakers.
The Council continues to engage all types of stakeholders on this topic to ensure that nonprofit media organizations are treated consistently and fairly under the law.
Nonprofit Media in the News
Nonprofit media organizations are receiving a lot of media attention these days for stepping up to fill a void in critical public interest reporting. We’ve developed a running list of this coverage as a resource for nonprofit news organizations, the nonprofit and philanthropic community, and anyone who is interested in nonprofit media or who wishes to research this emerging topic.
- Support crucial for non-profit journalism - USA Today
This article affirms the critical role nonprofit journalism is playing today, but argues that unless these organizations diversify their revenue streams, their continued existence is in danger. Quotes Steve Waldman, principle author of the FCC’s major 2011 study on American news media, saying that “if the winners of the new economy put a tiny bit of their wealth into this [area], this whole space would be transformed.”
- Nonprofit Journalism: A Growing but Fragile Part of the U.S. News System - PewResearch Journalism Project
This piece outlines a new study by the Pew Research Center on nonprofit journalism, and explains that “the growing nonprofit news sector is showing some signs of economic health, and most leaders of those outlets express optimism about the future… But many of these organizations also face substantial challenges to their long-term financial well-being.”
- Big questions face news nonprofits on the road ahead - Knight Blog post by Elise Hu
This blog piece on the Knight Foundation’s website details a roundtable discussion sponsored by Knight and the Pew Research Center and the Knight Foundation on the stability of the nonprofit news model. In the piece, Hu lists five key takeaways from the discussion.
- No “New Normal” Yet! Pew/Knight Session Finds Nonprofit News Enterprise Models Still in Formation - Nonprofit Quarterly
This article details the nonprofit media roundtable discussion hosted by the Knight Foundation and the Pew Research Center. It gives a wide-reaching overview of the discussion and states, “There were no hard and fast conclusions, but it was evident that this was a dynamic field of organizations trying to discern a way forward, not just for their sites but for journalism more generally.”
- New Report Sheds a Clarifying Light on Patterns of “Enterprise” in Nonprofit-Based News Sites - Nonprofit Quarterly
This Nonprofit Quarterly article gives an overview of an October 2013 report by the Knight Foundation on state of nonprofit media. The article includes an interview with two key Knight employees, Mayur Patel, Vice President of Strategy and Assessment, and Michael Maness, Vice President of Journalism and Media Innovation.
- Nonprofit Journalism Struggles to Keep its Promise – Miami Herald op-ed by Edward Wasserman
This op-ed piece by Edward Wasserman, dean of the Graduate School of Journalism at the University of California, Berkeley, questions the sustainability of nonprofit media because of the ongoing challenge of finding durable sources of funding. Yet, Wasserman notes that despite this challenge, nonprofit media have the ability to foster “indispensable public conversation about common concerns.”
- The “Brutish” but Exciting Lives of Nonprofit News Sites - Nonprofit Quarterly op-ed by Larry Kaplan
In response to Edward Wasserman’s Miami Herald op-ed, Larry Kaplan agrees with Wasserman that “life in independent media has from time to time been somewhat ‘brutish,’” but that we should “keep our eyes open for the many experiments [in nonprofit media] that are working.”
- New Report Shows Growing Role of Philanthropy in Shaping the Media Landscape - Knight press release
This is a press release from the Knight Foundation on their new October 2013 report, Growth in Foundation Support for Media in the United States. The report “is a collaboration among the Foundation Center, Media Impact Funders and the John S. and James L. Knight Foundation, and provides the most comprehensive view to date of philanthropy’s role in the media funding landscape.”
- Experiments in Community Media - Huffington Post blog post by Kevin Murphy
This blog post from Council on Foundations Board Chair and Berks County Community Foundation President, Kevin Murphy, talks about the central role foundations have played in funding “new models of keeping our communities informed.” He also highlights the work of the Knight Foundation and the Council on Foundations in elevating the issue of nonprofit media.
Nonprofit Media Working Group
The Federal Communications Commission issued a report in 2011 concluding that accountability reporting, especially at the local level, has contracted dramatically, with potentially grave consequences for communities, government responsiveness, and democracy. Moreover, it determined that nonprofit media needs to play an increasingly significant role to help meet the educational needs of citizens. Finally, it found that there was confusion about the IRS approach to nonprofit media. This approach, which has not been updated for the digital age, risks discouraging nonprofit media innovation and undermining the odds of its success.
The report recommended that a group of tax and journalism experts gather to study these issues more carefully and make recommendations for further action. Supported by a generous grant from the John S. and James L. Knight Foundation, the Council on Foundations convened such a group from leaders of the foundation and tax-exempt media world. This group, listed below, has been meeting for the past year.
On Monday, March 4, 2013, the Council on Foundations and the Knight Foundation released the report in Washington, D.C., in conjunction with a panel discussion that featured journalism, legal, and nonprofit leaders.
Watch the Recording of the Release of the Report presented at The Newseum by Knight Foundation and The Council on Foundations
Nonprofit Media Working Group Members
Steven Waldman, Chair
James T. Hamilton
Knight Foundation Representative: Eric Newton, Senior Adviser to the President
Legal Counsel: Marc Owens and Sharon Nokes, Caplin & Drysdale
Project Directors: Janne Gallagher and Shelton Roulhac, Council on Foundations
Digital Media Law Project, Berkman Center for Internet & Society, Harvard University
Since 2007, the Digital Media Law Project (DMLP) has worked to ensure that individuals and organizations involved in online journalism and digital media have access to the legal resources, education, tools, and representation that they need to thrive.
Applying for 501(c)(3) status can be lengthy and complicated process. To help nonprofit journalism organizations prepare for IRS scrutiny, the DMLP now offers a collection of resources that includes: a checklist for whether tax-exempt status may be right for your venture; a breakdown of the IRS application process; a detailed guide to the standards used by the IRS to evaluate news organizations; and an archive of application materials filed by journalism non-profits that successfully obtained 501(c)(3) status.
At 1:00 P.M. Eastern on April 10, 2014, the DMLP will be holding a one-hour online session open to the public where you can ask questions about the DMLP's new resources for tax-exempt journalism and the IRS application process; log-in details will be posted on the DMLP homepage on April 10, so be sure to visit the site then.
As part of DMLP’s new resources for journalism organizations seeking 501(c)(3) status from the IRS, the John S. and James L. Knight Foundation supported the development of this new video that debunks some of the common myths and misconceptions about nonprofit media organizations.