How does the presence or lack of charitable status affect the development of not-for-

The presence or lack of charitable status can affect not-for-profit media in a number of ways: on the one hand, the charitable status constrains the contents that the media outlets are allowed to publish and their revenue model; on the other, the very same charitable status allows former for-profits to reemerge as not-for-profit outlets, accept the support of local communities and philanthropists, and continue the mission of informing and educating the public. The lack of this status or the delay in granting it (see above) can impede small and local media outlets from continuing to operate. However, in this section, the potential impact of funders on the contents and targeted audience of not-for- profit media outlets is also discussed.

Legal influence of tax-exempt status on the development of not-for-profit media

Since not-for-profit media outlets often rely on the ‘educational’ purpose to receive tax-exempt status and have to comply with a number of federal and state rules, this tax-exempt status has an inevitable impact on what they publish (see above more on the IRS methodology to evaluate the ‘educational purpose’) and how they are funded. The federal tax-exempt status imposes the following limitations (Digital Media Law Project, 2014):

a) The media outlet revenue model must depend primarily on public support such as foundation grants or individual donations, rather than on commercial revenue such as advertising or subscription fees;

b) The not-for-profit organization is not allowed to be affiliated with a for- profit organization in any way that would allow the former controls the not-for-profit’s activities;

c) The staff’s earnings must be consistent with the operation of the organization for the benefit of the public rather than personal profit;

d) The editorial process should aim to select and develop content that educates the not-for-profit media outlet’s audience, rather than covering news of popular interest;

e) The content published must be directed at members of the public, rather than at a private group; and

f) The not-for-profit media outlet is limited in the extent to which it can cover political issues in a partial way. As mentioned above, not-for-profit

180 _{Rick Cohen. The Role of Pierre Omidyar and Big Charity in the Ukraine. Nonprofit Quarterly,}

March 4, 2014, available at http://nonprofitquarterly.org/2014/03/04/the-role-of-pierre-omidyar- and-big-charity-in-the-ukraine.

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media outlets are not allowed to endorse or oppose political candidates and to support or oppose the passage of any bill.

Practical influence of tax-exempt status on the development of not-for-profit media Local media and investigative journalism

The tax-exempt status granted to not-for-profit media appears to protect in practice certain forms of news production, namely journalism that aims to inform and educate local communities, and investigative journalism. According to the Pew Research Center, not-for-profit media has stimulated the development of several local news ecosystems and most not-for-profit media outlets focus on the publication of local news.

Not-for-profit media has also been a ‘salvation boulevard’ for for-profit organizations with an investigative character facing financial problems. Since 2008, a number of for-profit newspapers and other media outlets on the verge of bankruptcy have converted to non-profit organizations and applied for a 501(c)(3) status in order to be able to continue their activities. This was the case of the Oklahoma Watch, which produces investigative journalism on relevant public policy issues in the state of Oklahoma. This organization converted to a not-for- profit organization in 2011 and applied for tax-exempt status on July 15, 2013. The IRS granted this organization 501(c)(3) status on November 17, 2013.181 The Council of Foundations, while lamenting the IRS outdated approach, noted that not-for-profit investigative journalism has served the public interest in a number of ways. Not-for-profit media outlet such as ProPublica, the Center for Public Integrity, and the Center for Investigative Reporting have covered misuses of public money, exposing controversial subjects such as police misconduct or misdiagnosis of returning war veterans.182

Impact of Funders

One of the challenges of not-for-profit media refers to the impact that funders might have on the content published by these outlets. Besides the abovementioned ‘for-profit vs. not-for-profit’ dialogue, a few words should be said about not-for-profit media funders and their impact on the development of journalism. Earlier this year, Media Impact Funders released the report “Funder Perspectives: Assessing Media Investments,” which was based on survey responses and interviews with 30 large and small foundations. These foundations were asked about the impact of the journalism projects they fund.183 The report concluded that the impact of the funders on the type of news produced was varied and difficult to assess according to the same metrics. The survey revealed that:

181 _{Digital Media Law Project, Successful Journalism Applications for Section 501 (c)(3) Status.}

Digital Media Law Project, 2014, available at http://www.dmlp.org/irs/applications.

182 _{Council of Foundations, 2013, op cit.}

183 _{Media Impact Funders. Funder Perspectives: Assessing Media Investment. Media Impact}

Funders, 2015, available at http://mediaimpactfunders.org/wp-content/uploads/ 2015/01/MIF_Funder-Perspectives.pdf.

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a) The funders target different audiences: while 64% of the them invest in media projects that target national audiences, the others focus on smaller numbers also reporting local (33%), regional (40%) or international (30%) targets.

b) The funders have diverse goals for their media investments: only 23% of respondents make grants in a dedicated media program, with others reporting that they fund media through other program areas (33%), through a combination of media-specific and other program areas (27%) or other options outside of these choices, including partnerships and general programs (17%).

c) The funders support media outlets that publish on a wide variety of topics, such as education (47%), health (40%), environment (37%), technology (10%), and housing (7%).

The Media Impact Funders also concluded from multiple interviews that a number of important funders were not supporting media for the sake of journalism but rather because this was a form of “funding social or systemic change and using media to advance specific goals”.184

Summary of the contemporary situation

The US has more not-for-profit media than the other nations in the study, but its charity and tax laws do not in themselves provide a more favorable setting. Although there has been support for altering laws so news enterprises could more easily achieve charity status, efforts to do so have languished. Organizations that have received charitable status have structured themselves to meet accepted criteria, often educational, scientific, or literary, or work through other charitable institutions.

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