IRS delivers blow to non-profit journalism

The Internal Revenue Service (Creative Commons photo by Scott S.)

The Columbia Journalism Review last month reported troubling news for those struggling to launch non-profit journalism ventures. From CJR:

Nonprofit news organizations applying for tax-exempt status are running into long delays as the IRS bundles them together as “precedential” and studies whether they qualify for the status under 501(c)(3).

Worcester Wired, the non-profit WPI professor James Dempsey and I founded in 2010 is lumped into that group waiting for word from the IRS. I took the summer off this past year and worked with six students as a test run for Worcester Wired and we were doing some pretty fabulous stuff. Until we can get that coveted 501(c)3 status, however, fundraising is an uphill road. And even though a lot of non-profit web-only operations can run on a very thin budget, you need to have some funding.

The holdup from the IRS is frustrating. In Worcester Wired’s case we not only sought to provide needed news and discussion to an urban area, but were using it as a training tool for college students to improve their writing and investigative skills while getting them out of their college bubbles and sticking them into the community. Sounds very non-profit to me.

So what distinguishes a non-profit news organization from a for-profit one? That’s a question I got asked a lot in regard to Worcester Wired and it’s a question that I believe strikes at the heart of why the IRS should consider continuing to green-light non-profit news orgs as they have done in the past.

Here are a few characteristics I think distinguish a non-profit from a for-profit media company:

  1. As “Deep Throat” told Woodward and Bernstein: “Follow the money.” For-profit media companies exist to make money. That money goes to investors, stockholders or owners. Yes, despite all the journalistic mission-mindedness most reporters and editors pride themselves on, newspapers are businesses that exist to make money for someone.  Non-profit doesn’t mean unprofitable, however. It simply means all of the money stays within the organization to fund the work and ensure (hopefully) the organization’s longevity. That’s a key difference.
  2. A non-profit company belongs to the supporters of the organization. For example, say Worcester Wired were to really take off. There would be no asset for Jim or I to sell someday or retire on. Instead, the hope is (as is the hope of all good non-profits) that the organization will continue to grow without you. This is very different from the old model that I was still seeing playing out many times as I first got into this business in the late ’90s. At that point, it was still somewhat lucrative for a publisher to pour his or her sweat into a small company and then sell it to one of the larger chains that were gobbling up newspapers.
  3. A non-profit is mission based. That’s not to say that for-profit newspapers don’t have missions, most all do. But at a non-profit that mission is center focus and it’s usually aimed at serving a need in the community — a need that may or may not have a profit margin.

Non-profits aren’t the only solution to cities and towns struggling for a strong news outlet. But they are one solution.