Senator Proposes Newspaper Tax Break

by Erik Sass, Mar 24, 2009, 5:26 PM

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First circulated in jest, then half in jest, the notion of a newspaper bailout is now dead serious with a proposal from U.S. Sen. Benjamin Cardin (D-Maryland), that newspapers receive tax exemption as nonprofit businesses if they elect 501(c)(3) status, like public radio and TV.

Choosing to operate under the designation "low profit limited liability companies" would exempt them from taxes and open them to investment from nonprofit organizations. This would prohibit them from endorsing political candidates.

It also would represent a fundamental change in their management and mission. After years as lucrative media cash cows producing profit margins of 20% to 30%, the switch to nonprofit status would alleviate corporate pressure, but would also raise issues surrounding advertising. How important would advertising revenue be for the bottom line? As nonprofit media, would they come under pressure from legislators to reject advertising from, say, liquor companies? Would the public accept corporate advertising in a tax-exempt business?

Whatever the answers to these questions, Cardin was emphatic about the need to save the dying medium. "The business model for newspapers -- based on circulation and advertising revenue, is broken, and that is a real tragedy for communities across the nation and for our democracy."

Remaking newspapers as nonprofits would almost certainly require big corporations to bow out, unless they have a philanthropic bent. Conversely, some nonprofit organizers have proposed a charitable role for Hearst in a new nonprofit publishing arrangement for the imperiled San Francisco Chronicle.

Not coincidentally, two of Maryland's biggest newspapers -- the Baltimore Sun and Baltimore Examiner -- are on the rocks financially; the latter has been threatened with closure.

"The measure is targeted to preserve local newspapers serving communities and not large newspaper conglomerates," said Cardin's statement. He added: "This may not be the optimal choice for some major newspapers or corporate media chains, but it should be an option for many newspapers that are struggling to stay afloat."

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0 comments on "Senator Proposes Newspaper Tax Break ".

1. Carter Crawford
   

   commented on: March 25, 2009 at 11:41 a.m.

   If the can reorgaize as a 501 (c) (3) the IRS will have no reason not to give them tax free. But if they do this it should be with the provision they can not go back to commercial status ever. The larger issue is should congress allow this and will it save a medium destined to lose the paper version and go all electronic. Unlike the banks that cheated, auto that did not listen to changing needs the newspaper is the victim of societal changes that want everything on line, mobile etc. I love the printed version, but then i am not 18-34 but the second larger issue is why print and not other industries like broadcast..Young???

2. Angela Horn
   

   commented on: March 25, 2009 at 1:34 p.m.

   Being a nonprofit is already a choice for radio and TV - they can fly under the NPR or PBS banner.

   Personally, I don't know why the public at large would be averse to seeing paid ads in a non-profit medium because there are ads on NPR and PBS. Operating money has to come from somewhere.

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