IRS Suppressing Nonprofit, Investigative Journalism?

Editor’s Note: Raging Chicken Press readers may recall that earlier this summer we announced that we intended to turn Raging Chicken into a 501(c)(3) nonprofit media organization. This article was an unexpected outcome of our research into becoming a 501(c)(3) organization. Like dozens of would-be media start-ups seeking to do media in the public interest, we thought we would be looking at a few months awaiting a decision from the IRS. We were wrong. Raging Chicken is now exploring a range of options for ensuring we can continue to do this work. Stay tuned. 

The combined forces of rapid consolidation of traditional media organizations into a handful of global corporations and the rise of the Internet and accessible blogging platforms, have led to the slow but steady growth in nonprofit, investigative media sites over the past decade. Free Press’s page on Nonprofit Journalism describes the dynamics this way:

The ravages of consolidation and the rise of the Internet have converged to create a crisis in journalism.  Job cuts have decimated newsrooms, media companies have closed foreign bureaus, and the number of journalists covering statehouses has shrunk to almost zero in many places. Many small cities and towns — and even large cities like New Orleans — are now without a daily local newspaper.

But good things can emerge from bad situations, and observers have heralded the rise of nonprofit journalism organizations as one of the news industry’s most promising developments. In the last several years, veteran reporters, tech-savvy journalists and members of the public have started dozens of vibrant journalism nonprofits.

Indeed, some of the most cutting progressive investigative journalism and in-depth reports have come from nonprofit media sites such as ProPublica (established in 2007), ThinkProgress (established in 2004 as a project of the Center for American Progress Action Fund),  TruthOut (established in 2000), and The UpTake (established in 2007). In 2010, ProPublica broke new ground for non-profit, Internet-based media by becoming the first online news source to win a Pulitzer Prize for a story by Sheri Fink on the aftermath of Hurricane Katrina. In 2011, ProPublica reporters Jesse Eisinger and Jake Bernstein won the organization a second Pulitzer for their series “The Wall Street Money Machine.” These are just two high-profile examples among the hundreds of awards won by reporters working for nonprofit media organizations doing journalism in the public interest.

Progressive, non-profit journalism is not new, of course. Mother Jones, The NationIn These Times, and Labor Notes, for example, have been doing non-profit journalism for decades and have made an effective transition from print-only magazines to vibrant, online media sites. However, the dynamics noted by Free Press are new. As corporations consolidate their media empires, they are cutting investigative journalism – especially at the state and local level. There is a standard narrative for why this is happening. In 2009, Laura Frank’s investigation into the reason for the decline in investigative journalism, “The Withering Watchdog,” laid out that narrative as follows:

The story line has been repeated time after time: The internet is killing mainstream media, sending the Fourth Estate into record-breaking revenue declines. Online ads garner only a fraction of the dropping print revenue. When faced with cuts, investigative reporting is often the first target. Investigative journalism takes more time and more experienced journalists to produce, and it often involves legal battles. It’s generally the most expensive work the news media undertakes.

Frank’s investigation found this narrative to be partial, at best:

The decline in investigative reporting — the in-depth stories that hold the powerful accountable in a democracy — began long before the current economic collapse. The crisis that has pundits worried about the survival of serious journalism in America began with what the journalism industry did to itself…

…[We] analyzed the financial records of the five most profitable publicly-traded newspaper companies in America. Not only was each profitable during last year’s apocalyptic financial collapse — averaging nearly $294 million in profits each — but when adjusted for inflation, the profits these media giants made in 2008 were higher than their 20-year average profits.

In other words, even in the worst economy since the Great Depression, these top media companies made more profit than they had on average for the past two decades…

…Media companies have been siphoning money from their newsroom budgets to pad profits, which many then leveraged to buy more properties in recent years. In the current recession, some are finding their financial positions may be too weak to weather the storm. Investigative stories — with their relatively high costs and potential to turn out to be dead ends — are often among the first things to get the axe.

In other words, the decline in investigative journalism is a direct result of the kind of corporate profit-taking that was made famous by Mitt Romney during the last presidential campaign — “the Bain model” of vulture capitalism. The fact that investigative journalism is a casualty of corporate profit-taking at the very moment when corporate profit-taking is precisely what needs to be investigated, shows that money is not the only thing being robbed from the public. The very basic raw materials of democracy – information, knowledge, transparency – is being forced into extinction, at least in traditional, mainstream media.

Nonprofit journalism organizations or projects have grown rapidly since 2008, in part as a response to cuts in investigative reporting by traditional media outlets. One of the people interviewed for an article in the June/July 2013 issue of the American Journalism Review, Lucy Dalglish, dean of the Philip Merrill College of Journalism at the University of Maryland, stresses the importance of nonprofit media in today’s media landscape:

“As major news organizations downsize, they have been scaling back their investigative reporting efforts to save money…Some very experienced investigative reporters have taken buyouts from their former employers. Many of them love being investigative reporters and are looking for ways to continue their work, which makes valuable contributions to society. I view [supporting nonprofit media companies] not as growing accountability reporting; I believe it’s essential for the survival of accountability reporting by trained professionals.”

However, over the past several years, the IRS has virtually shut down new applications for nonprofit, 501(c)(3) media organizations. In 2011, the Federal Communications Commission (FCC), issued a report, The Information Needs of Communities: The Changing Media Landscape in a Broadband World, which found that part of the problem stems from antiquated IRS regulations regarding 501(c)(3) organizations, especially as they relate to nonprofit journalism. The FCC report helped spur the Council on Foundations to form a “working group of tax and journalism experts” to further study the issue and make concrete recommendations. This past March, the Council on Foundations issued its final report “The IRS and Nonprofit Media: Toward Creating a More Informed Public,” which makes specific suggestions for reforming the tax code to better reflect the new media landscape.

If sparks of connection with the recent IRS/Tea Party scandal are flirting with your neurons right now, you’re not alone. Writing in the Columbia Journalism Review back in May, Ryan Chittum argued that the rants of right-wing pundits against the IRS for sitting on 501(c)(4) tax exempt applications from groups associated with the Tea Party, were similar to the complaints made by non-profit journalists for years:

Tell me if this sounds familiar: The IRS targets a particular kind of nonprofit applicant for special scrutiny. Scrutiny comes from the Cincinnati office, works upward to Washington, D.C., and leaves applicants in limbo for years. After years of rubber-stamping approvals, the review comes amid a surge in applications in a murky part of the tax code. Some suggest politics plays a role in favoring some applications. The IRS itself specifically questions applicants about their political activities.

That’s what happened to the nonprofit-news movement for the better part of three years, something I reported on last fall. But there’s been little-to-no uproar over the First Amendment implications of selecting journalism startups for special scrutiny.

San Francisco Public Press, El Paso’s Newspaper Tree, New Orleans’s The Lens, Rhode Island’s Johnston Insider, the Investigative News Network, San Diego News Room, Virginia’s The Arlington Mercury, and the Chicago News Cooperative all had to run the IRS gamut—and those are just the ones we know about. (The right-wing provocateur James O’Keefe III’s Project Veritas, by contrast, breezed through 501(c)(3) approval while legitimate news organizations who had applied earlier waited years, answering repeated (and repetitive) inquiries from IRS agents.)

The INN’s Kevin Davis told me last November that “The IRS has preemptively suggested that we modify our procedures, change our policies, and modify our articles of incorporation to remove the word ‘journalism’ because that is not a charitable cause.” Agents asked the SF Public Press, repeatedly, to sign forms promising not to make political endorsements, according to Steven Waldman’s Council on Foundations report two months ago.

The story of why this is happening mirrors the larger political context of the past twenty-five years. The buzzwords of streamlining, downsizing, and “efficient” government while stripping away regulations and oversight, has led to a less efficient and less responsive government – at least for the average citizen. For those interested in the full story, check out ProPublica’s article, “How the IRS’s Nonprofit Division Got So Dysfunctional,” from May of this year. In short, the very process that has made government a friendlier place for large, multinational corporations has put up barriers and confusing processes for citizens.

For new nonprofit journalism start-ups seeking to “do” journalism in the public interest, there is no clear solution for the near future – if by solution we mean clear direction from the IRS or new legislation to update IRS regulations to better accommodate our new media landscape. Until such a time, nonprofit journalism organizations will have to either find other ways to fund their projects or learn the ins-and-outs of the IRS codes and adapt their organizations to meet the out-dated rules. Last year, Harvard University’s Berkman Center for Internet and Society issued the first comprehensive guide for journalism and publishing nonprofit organizations to help navigate the process. As the report says,

Until and unless there is action in Congress to facilitate tax exemptions for journalism non-profits, news organizations seeking 501(c)(3) status must learn how to structure their operations to meet the existing standards applied by the IRS.

This should be concerning to all progressives and people who believe that the role of journalism is to hold powerful people and institutions accountable. If we didn’t have the Center for Media and Democracy and their ALEC exposed project, we would not know the extent to which the American Legislative Exchange Council (ALEC) is buying off state legislators and handing out pro-corporate model legislation across the country. Without the relentless investigative work of ProPublica, it is doubtful that we would know how deep Wall Street corruption went and the degree to which Wall Street knowingly sank the economy. But, perhaps more importantly, without small, nonprofit journalism start-ups in localities and regions across the country, “accountability reporting” – reporting that holds those in power accountable – will all but disappear in the current media environment.

As of this post, the IRS has given no indication as to whether or not it will seek to revise its regulations regarding nonprofit journalism and publishing organizations.



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About Editor, Raging Chicken Press 483 Articles
Kevin Mahoney is the Founder and Editor Zero of Raging Chicken Press. When he's not rabble-rousing on Raging Chicken, he's teaching rhetoric and writing at Kutztown University.

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