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Not-For-Profit News

The Guardian office, London
photo by Bryantbob

In an era in which there is not much profit in corporate journalism, one way to support news reporting is by making it an explicitly philanthropic enterprise.

This is not a brand-new idea; I wrote about nonprofit news outfits like The Texas Tribune and ProPublica in this space years ago. But what would happen if the owners of well-established, mainstream outlets decided to forgo potential capital appreciation and instead pursue greater donations by making such gifts tax-deductible?

To take a more concrete example: How would we feel if Fox News became a federally recognized nonprofit organization, supported by tax-deductible contributions? On the other end of the spectrum, what if The Huffington Post became a nonprofit? How about Breitbart or Addicting Info?

If you are going to decide that journalism is a charitable endeavor, and if you are going to respect the First Amendment, then it is hard to see where you could limit the sort of journalism that philanthropy can support. Regardless of how you feel about any of the outlets I just listed, we should not ask or expect the Internal Revenue Service to evaluate their journalism’s bias or quality. If we are going to allow that journalism can be philanthropic, then each outlet will have to define the public good for itself.

As a practical matter, this ship has already sailed – and not only for smaller outlets like The Texas Tribune. Consider The Guardian, a major British newspaper that is now eligible for tax-favored treatment in the United States.

Last October, the IRS affirmed the nonprofit status of theguardian.org, a U.S.-based entity that will focus on seeking support from other philanthropic ventures, corporate foundations, think tanks and other organizations that may be interested in underwriting in-depth coverage of particular issues, such as human rights. The New York Times reported that the unit has secured several major partnerships, including a donation of more than $1 million from the Skoll Foundation (set up by the first president of eBay, Jeff Skoll).

The Guardian is not new to creative thinking about underwriting its journalism. As I wrote earlier this year, the outlet has avoided the dreaded paywall approach in favor of politely asking for donations at the bottom of articles on its U.S. website. As of this writing, that request still takes American readers to a page where they can donate to the Guardian News & Media, the Guardian Media Group subsidiary that actually publishes The Guardian. Such donations are not tax-deductible under U.S. tax law.

Then again, if individuals kicking in a few bucks here and there could have kept The Guardian afloat, it is unlikely that The Scott Trust Limited (which owns the Guardian Media Group) would have gone to the trouble of setting up a U.S. nonprofit entity. Instead, it seems clear that large institutional supporters are the target. The Times reported that philanthropic partnerships made up only about $4.9 million of The Guardian’s approximately $276 million in revenue for the 12-month period that ended in April. But future hopes are presumably higher, especially as the cash pile resulting from the parent organization’s 2014 sale of AutoTrader runs down.

As a 501(c)(3) organization, theguardian.org will be subject to limits on its political activity; notably, it will be forbidden from explicitly supporting or opposing specific candidates or parties. This is a likely reason why The Scott Trust set it up as a partner organization to Guardian News & Media, rather than restructuring the latter. As existing not-for-profit news outlets have demonstrated, a clear slant to the right or left is not out-of-bounds. The Scott Trust’s own charter is explicit that The Guardian, while not formally aligned with any particular British political party, is meant to remain “faithful to its liberal tradition” – whatever that means, considering the practical changes in the meaning of the term “liberal” over the past 80 years.

Apart from the technical niceties of qualifying for charitable status, there is also the question of whether it is fair to have tax-advantaged news outlets compete with those in the commercial sector. I dislike the concept. But you need only look to PBS and NPR to see that not-for-profit news, while popular with certain audiences, is no real financial threat to its competitors. If there’s not much money to be made in journalism these days, not-for-profit outlets can’t cost anybody very much.

The Guardian has a significant, though not huge, American audience. But the only way it qualified as a U.S. charity was through a separate entity, set up specifically to funnel cash to this commercial British organization. I used the term “commercial” advisedly. The Guardian’s mission is to turn a profit (something it has lately been unable to do) in order to sustain itself; however, the Scott Trust, its owner, is run by a self-perpetuating board of trustees without any private equity holders. The arrangement was created in the 1930s to shield the then-flourishing newspaper from British inheritance taxes.

The Guardian’s status as a charity tests our principles in a way previous not-for-profit news organizations, which have limited reach except when they distribute content through other outlets, did not. If we are going to treat The Guardian’s journalism as being in the public interest, then we can’t have any principled basis for distinguishing it from that of outlets owned by Rupert Murdoch and his sons. I am not sure that The New York Times’ editorial page would be a stickler for such principles, however, should Fox News follow The Guardian’s example.

The Times itself is taking the more traditional approach of trying to make money the old-fashioned way: by getting its audience to pay up if advertisers won’t. Yet if that approach fails, I would not be surprised to see the day when the Times casts itself as a philanthropy too, serving the public interest. Like everyone else, the venerable Gray Lady will be entitled to define what it means by “public interest” whenever that day comes.

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