The Citizen Media Law Project has just published an excellent, interactive guide to the IRS 501c3 designation as it applies to news media. You can find that guide at http://www.citmedialaw.org/irs/home
News-based media is searching for a new business model, largely because the old advertising-based model was geared to work with print, rather than the digital environment. News organizations are increasingly turning to a model that was pioneered by independent media, a nonprofit model based on individual donors and foundation-funded projects.
The two barriers to non-profit status have been based in IRS questions around politics and mission. The 501c3 designation prohibits support of any individual candidates, meaning news organizations cannot publish editorials that focus on such candidates. Nor can 501c3 organizations lobby for legislation (though they have a limited ability to educate the public about legislation that is directly tied to their mission). In the past, the most significant hurdle for independent media seeking exempt status was often based in the IRS’ understanding of how an organization reported on and analyzed politicians and political events.
More recently, however, the IRS put a temporary block on news media applications for exempt status for reasons that seemed unrelated to politics. While the IRS has issued no statements, observers have come to believe that the concern is based on the mission of news organizations. To obtain exempt status, an organization must prove it falls into one of several well-defined categories. The usual category for news media is “education.” That means an organization must show that it is mission-driven, and that its mission is to educate the public, preferably around a particular set of issues. “Journalism” is not considered, in itself, a type of education.
Many members of the independent news media have no problem demonstrating an educational mission. For example, Media Consortium member Earth Island Journal has a mission to educate its audience about the environment. Ms. magazine has a mission to educate its audience about the war on women (though perhaps they might not put it to the IRS in that language!). News media with a political mission–that is, a mission to educate the public about our country’s political life–have to be careful not to fall afoul of the prohibition on lobbying, but with careful lawyering the IRS has generally been willing to accept these politically-driven news organizations as having an educational mission (the prime example being Mother Jones).
The guide created by the Citizen Media Law Center, a research center hosted by Harvard University’s Berkman Center for Internet & Society, should help news organizations wind their way through the IRS reefs and arrive at exempt status.
The recent problems with the IRS highlight a larger issue, however, that has not been well-discussed: what are the consequences for news media of becoming exempt organizations as defined by the IRS?
Consider this. In so far as they are mission-driven, exempt news media will have a point of view on the news they cover–that is, their mission will determine what they cover, how they cover it, and so forth. And indeed, as a practical matter, nonprofits quickly discover that if they don’t have some kind of point of view, it is hard to raise money from donors. The nonprofit ecosystem is set up to reward those with a point of view.
On the other hand, exempt news media are not allowed to express their point of view in any way that would have a direct impact on the political system, such as supporting candidates or advocating the passage of legislation. It is for this reason that several strongly opinionated independent news organizations, like The Nation, have chosen to remain for-profit.
The exempt status, in other words, puts political news media in a peculiar bind of being advocates for a point of view and yet being unable to encourage action on that point of view. The status discourages media from being “completely objective” in the old-fashioned sense of journalism, because providing “all the news that’s fit to print” is not the motto of an educator but of a transmitter. Yet the status prohibits media from espousing a specific point of view, as that would move into lobbying.
There are, of course, many subtle shades to both “education” and “lobbying,” and successful news-based media nonprofits have found their own sweet spots. It is time, however, to think more carefully about what we want journalism to be. The exempt status is a gift from the state for organizations that do important social good within civil society. What is the role of journalism in civil society? When we set aside the tech and the tools, what do we as journalists want to provide to our society? What should our society demand from us?