Over the last several decades, accountability reporting, especially at the local level, has contracted dramatically, with potentially grave consequences for communities, government responsiveness, and democracy. Nonprofit media has the potential to partly fill this vacuum but faces obstacles as a result of outdated IRS rules.

A report by the Nonprofit Media Working Group (NMWG) of the Council on Foundations [led by Steven Waldman], “The IRS and Nonprofit Media: Toward Creating a More Informed Public,” makes specific recommendations to the IRS that maintain essential distinctions between for-profit and nonprofit media but remove obstacles to the types of innovation that are needed to fill the gaps in nonprofit news, especially accountability journalism.

The report highlights five key problems with the current IRS approach:

1. Applications for tax-exempt status are processed inconsistently and take too long. …
2. The IRS approach appears to undervalue journalism. …
3. The IRS approach appears to inhibit the long-term sustainability of tax-exempt media organizations. …
4. Confusion may be inhibiting nonprofit entrepreneurs trying to address the information needs of communities. …
5. The IRS approach does not sufficiently recognize the changing nature of digital media.”
   Source: Council on Foundations

The report looks at the experience of nonprofit media like The San Francisco Public Press, The Lens, The Chicago News Cooperative, and others, to diagnose problems in the IRS pipeline. The major ones: the lengthy and inconsistent process for granting tax-exempt status; confusion among current nonprofits over how they can conduct business; and a failure by the IRS to recognize how old distinctions between nonprofit and commercial media have been changed by new technology.

… The report recommends the IRS update its methodology for granting tax-exempt status by focusing on how media organizations provide a community benefit as well as discounting operational similarities between nonprofits and for-profits. Knight, Ford, and the Foundation Center also plan to work with Guidestar to create a better system to create a comprehensive database of nonprofit news sites and track the creation of new ones.” Source: Justin Ellis, Nieman Journalism Lab