Meet
The Salt Lake Tribune, 501(c)(3): The IRS has granted nonprofit status to a
daily newspaper for the first time
It’s a
big step for Salt Lake City — but also a major opening for other newspapers who
might find nonprofit status a more appealing alternative than selling or
closing down.
It was a “happy surprise,” Fraser Nelson said, when The Salt Lake Tribune received a letter from the IRS on Friday
giving the 148-year-old news outlet nonprofit 501(c)(3) status — no questions
asked.
A final verdict on whether the Tribune could
become the
first legacy newspaper in the U.S. to go fully nonprofit wasn’t expected until early 2020, Nelson
(vice president of business innovation) and Jennifer Napier-Pearce (editor-in chief) told me. It had
received approval for
the parallel Utah Journalism Foundation a few months ago — also with no questions, but that was a
more straightforward request. This approval opens the doors for many more
commercial legacy newspapers to seek tax-deductible status and philanthropic
funding — a potential lifeline for local news outlets whose owners agree to
give up control.
“We argued that our business will not change
and we will continue to support the community that we serve and left it open to
interpretation,” Napier-Pearce said. “We figured if they do go ahead with it,
our circumstance is not going to match the circumstance of local newspapers around
the country. We wanted maximum flexibility so other people could tinker with
this recipe for their particular needs. Our argument is we’re already doing the
work of a nonprofit. We should qualify for that tax status.”
“Without a lot of feedback from the IRS, we’re
grateful that we have a pretty blank slate,” Nelson said. “We want to make sure
we’re making decision that make sense for us as an institutions, make sure they
are in context of the larger national — what this means for other papers and
for journalism generally.”
(They asked me to share the donate link, which will probably become very familiar to
Tribune readers once the paper figures out some infrastructure questions. The
Tribune also received funding from the Google News Initiative to work
on these items last month.)
The Tribune announced the
news this morning, just five months after it submitted its application to the
IRS. (I reached out to the IRS for comment and will update if I hear back.) In
June, we unpacked
the various hoops the
application would have to jump through with Nelson and media law expert Jeff Hermes, such as:
“Are you using commercial revenue streams such as advertising or
subscription fees without attempting fundraising?”
The Tribune had offered up advertising as
unrelated business taxable income to the IRS, meaning that it would be outside
the purview of their tax deductibility, but the IRS didn’t issue any
instruction on how to treat it. Subscriptions may become tax-deductible, but
Fraser said they’ll have to figure out if that status would vary between
digital and print subscriptions (since a print edition involves more business
operations, like printing and distribution). So for now, TBD.
But the nonprofit
newspaper will be able to attract a new mix of revenue streams, reliant on
philanthropic giving, smaller donations from readers and supporters, and the
endowment of the separate Utah Journalism Foundation. (Nelson said earlier this
year that they were aiming to raise $60 million for that. Today she said she
couldn’t share anything about the amount raised thus far. UJF grants will also
go to other Utah news organizations besides the Tribune.)
Reminder: “Nonprofit” doesn’t mean “no
business plan.” Nonprofit journalism in general has seen an remarkable
boom over the past ten years, but the outlets still need to invest in their business and
fundraising operations to sustain the editorial operations.
“We’ll be forthcoming about where that is but
one thing that’s really important is to stress again that the purpose of this
foundation is to help sustain The Salt Lake Tribune in perpetuity but also to
make sure that we’re doing as good a job as we can with promoting and
supporting independent journalism in the state,” Nelson said.
The Tribune also needs to detangle itself from
its business relationship with the other Salt Lake newspaper, the Church
of Jesus Christ of Latter-Day Saints-owned Deseret
News. They’re currently part
of a joint-operating
agreement that strongly
favors the Deseret News and will expire next year. “We’ll need to figure out
what our relationship looks like, if any, going forward. But these are all
really good things to deal with and to noodle over,” Napier-Pearce said.
With this change, Salt Lake City will be home
to what must be the least commercially oriented local news scene in the country
— two daily newspapers, one owned by a church, the other run as a nonprofit.
“Are you engaged in political activity?”
As part of this shift, the Tribune editorial
board will officially step back from endorsing candidates, which publisher and
owner Paul Huntsman had seemed thrilled to give up earlier this summer. (Yes,
he is of the
Utah Huntsmans.) The
editorial cartoonist Pat
Bagley will remain, as
will the Tribune’s sports analysis and regular newsroom operations. “The
integrity of our reporting and our values as a news organization won’t change,
but we will engage with the community in new ways and ask for their support,”
Napier-Pearce said in the announcement Monday.
She added to me: “We are very much a community
newspaper, so our focus will always be on Utah. We’ve really changed the way we
look at and define news just because of limited resources…It’s really going to
depend on the generosity of our donors and the community coming together and
see what we can do. My ultimate hope is to expand the newsroom, replace the
reporters that we are sad we had to let go, and start to rebuild.” (The Tribune
laid off more
than a third of its newsroom last year.)
Over the summer, the Tribune held focus groups
and is planning a listening tour to talk with its audience more directly,
Nelson said.
But “political activity” — a no-no for
501(c)(3)s — can mean more than just election-time endorsement slates, Hermes
had warned in June; this is the kind of item that can be very curiously
interpreted. He emailed me his take Monday morning:
It
remains possible, for example, that the subjects of a newspaper’s coverage —
particularly political figures who are displeased by stories perceived as
negative — could complain to the IRS that the paper’s reporting runs afoul of
the candidate endorsements rule even though the paper does not make formal
endorsements. It is worth noting that the “endorsements” rule is not limited to
formal endorsements; rather, the rule in question prohibits “participat[ing] or
interven[ing], directly or indirectly, in any political campaign on behalf of
or in opposition to any candidate for public office.” Treas.Reg. (26 C.F.R.)
1.501(c)(3)-1(c)(3)(iii). We are in untested waters with respect to how these
rules apply to a nonprofit newspaper with robust political reporting. Perhaps a
court would consider this “indirect intervention,” or perhaps not; it would at
any rate involve a highly fact-specific inquiry based on the nature of the
coverage.
(That said, while no nonprofit newspaper has
engaged in “robust political reporting,” plenty of other nonprofit news outlets
— The Texas Tribune, ProPublica, the Center for Public Integrity, and so on —
have done plenty of work that has impacted the fates of candidates and
campaigns. We’ll see.)
“Is your ownership ready for this?”
Huntsman, publisher and owner since 2016,
seemed very ready in his
note to readers Monday morning, referring to the market failure of local journalism: “I will
not be held hostage to a broken system.”
Huntsman — part of a powerful local family,
deeply embedded in the community, wealthy outside his newspaper holdings — is
the most obvious sort of owner to be interested in nonprofit status. Local
newspapers are currently fighting to build a profitable and commercial future,
of course. But one could imagine, if their newspapers’ financials get
substantially worse, that owners like John Henry in Boston, Glen Taylor in Minneapolis, Warren Buffett in Omaha, the
Blethens in Seattle, or
maybe even the Decherds in Dallas could see this as a path
forward. It could be even more of a boon to smaller newspapers, dailies and
weeklies, which are more likely to still be locally owned.
That said, don’t expect much interest from the
nation’s big newspaper chains, which own an ever-growing share of the newspaper
landscape.
Control of the Tribune will now go to the
board of the nonprofit (separate from the board of the Utah Journalism
Foundation, which will focus on fundraising) and supported by several advisory
committees. There’s a placeholder board for now, Napier-Pearce said, since the
approval just came through; but they hope to develop a board “that reflects who
we are as Utahns. We also want experts from the industry to step forward. I
don’t know exactly what the makeup is going to look like, but it will be very
different six months from now,” she said.
There’s a lot to be determined. Will the new
revenue enabled by nonprofit status be a game-changer or a trickle? If the
mission is more squarely about journalism and community service now, does that
speed up an end to print? (It’s a huge cost item in newspaper budgets, but it’s
also still a huge driver of revenue.) How will the IRS respond to any
challenges to the new status? Will there set off be a flood of outlets rushing
to get tax-deductible funding?
The news took Media Twitter by happy surprise
as well:
Congratulations to the @sltrib, which did what I honestly thought it
couldn't: convince the IRS to let it convert from a for-profit to a nonprofit
business https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake/ …
The Salt Lake Tribune, a daily newspaper there, becomes a
non-profit 501(c)3. That's a big deal. Not a commercial business owned by a
foundation or school, like some newspapers are, but its own non-profit. https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake/ …
Huge news in local news: @sltrib's non-profit status has been approved by
the IRS https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake/ …
This is truly a very big deal... "In historic shift,
The Salt Lake Tribune gets IRS approval to become a nonprofit" via @sltrib https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake … /1
Back in 2012 it wasn't clear the IRS would allow
nonprofit journalism to exist, and today it has endorsed a major metro daily
newspaper converting to nonprofit status. That is a huge endorsement of the
value of and need for nonprofit news as a core part of American democracy. /2
Salt Lake City's daily Tribune newspaper becomes a
nonprofit -- an important move into the future of local news for two reasons.
1) Ownership was enlightened. 2) IRS, notably stingy about giving nonprofit
status to journalism, said OK. https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake/ … h/t @jayrosen_nyu
Note how the @sltrib's owner Paul Huntsman uses the term
'community institution' to describe the paper. I think that idea will be put to
the test here in an interesting way. https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake/ …
STOP THE PRESSES. LITERALLY, @WarrenBuffett. They did it. Congrats,
Salt Lake!https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake/ …
I know I already tweeted this story. But I'm still so
happy about it. It was fun to walk into the newsroom and see the reaction this
morning.
In historic shift, The Salt Lake Tribune gets IRS approval to become a nonprofit, via @sltrib https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake …
In historic shift, The Salt Lake Tribune gets IRS approval to become a nonprofit, via @sltrib https://www.sltrib.com/news/2019/11/04/historic-shift-salt-lake …
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