May 24, 2013

News Nonprofits Should Join the Push for IRS Reform

The tempest around the Internal Revenue Service's practice of targeting conservative political groups has overshadowed the plight of nonprofit news organizations seeking tax-exempt status. Journalism startups have suffered delays of up to 32 months in a process that normally takes no longer than six months.

But the cause of our problems runs deeper than the basic question of whether we engage in partisan politics — which we certainly do not. The agency's Exempt Organizations Division is clearly struggling when it comes to defining what a charitable purpose is for many categories of organizations.

If reforms are in the offing at the IRS, then journalists in the nonprofit sector must make a strong and coordinated case to policymakers that our burgeoning industry deserves 501(c)(3) tax-exempt status.

Public-interest journalism is indeed a charitable activity and should qualify as a charitable purpose before the IRS. For news nonprofits, this is an opportunity to explain why journalism directly benefits communities.

The IRS took more than two and half years to approve the application of the San Francisco Public Press, the group I direct. Only a few of the questions we received concerned political endorsements — which we have never done, nor plan to do, because we do not engage in advocacy.

Instead, most of the agency's inquiries were about organizational structure (making sure our founding papers were in order), educational mission (intern mentorship and public programs) and business model (why we charge for our print edition and don't accept advertising).

Eventually we allayed the agency's concern that though our model is unusual, it does fit into the nonprofit mold. The back-and-forth was exhaustive, and exhausting, but ultimately we were approved last summer.

The impression I got was that the agency slowed down the applications for anything calling itself "journalism" because it didn't understand why so many similar applications appeared in a short span of time.

The IRS exemptions office is clearly understaffed, and had a less-than-consistent approach to determining nonprofit worthiness because the code is so complicated, convoluted and hard to interpret.

We did not end the process believing that the IRS was out to get us, but that it was an agency trying — often unsuccessfully — to triage a flood of applications in a growth area to avoid setting bad precedents.

Journalists understand that tax-exempt nonprofit status is a privilege, not a right, and that all organizations should provide a clear articulation of and evidence for their charitable purpose.

While the delay was frustrating (as it remains for other nonprofit news organizations), we understand that it is part of an established process.

But this process can and should be improved. Vague areas of law should be clarified to make sure cases are handled consistently and efficiently.

If groups suspect they are being targeted unfairly by an unaccountable IRS, one solution would be to open the process to greater public scrutiny.

Why does the agency deliberate in secret about charitable organizations seeking tax subsidies from the government? Posting nonprofit groups' initial applications and subsequent correspondence with IRS agents on the Internet could allow concerned citizens to monitor the effectiveness of the process, and ferret out any signs of bias.

The Investigative News Network's Kevin Davis has testified in Washington about the delays nonprofit news organizations have faced.

If this crisis at the IRS leads to reform efforts, it could be an opportunity for INN and the emerging cohort of news nonprofits seeking 501(c)(3) status to press their case.

And it is a compelling case. If we approach this in a public and accountable way, we can change the IRS's practices in evaluating current and future journalism initiatives.

Most of us got into this business because we passionately believe journalism serves the function of public education — and we have submitted applications to the IRS tailored to the education-exemption provision of the tax code.

Journalism differs starkly from the lobbying and protest activities that political groups seeking 501(c)(4) status engage in.

By clearly reiterating what we stand for — independence, impartiality, accountability, accuracy and public service — we can educate communities and policymakers about how IRS reform can encourage innovative ways to reinvigorate the economically and editorially weakened Fourth Estate.