Screen Shot 2013-03-04 at 10.44.51 AMAs news organizations cut costs, lay off staff, and struggle to survive in the sometimes unfriendly digital era, the kind of public service journalism that they have specialized in for decades has come under serious threat. In 2011, the Federal Communications Commission issued a report that warned that accountability reporting has dropped significantly. Not great news for a functioning democracy.

In the wake of that report, a new group of journalists and tax experts got together and called itself the Nonprofit Media Working Group, operating under the auspices of the Council on Foundations. The group’s goal has been to call to attention issues around taxes that make it harder for nonprofit media startups to exist and do their job well. Today, the working group released a new report that calls on the US Internal Revenue Service to make tax rules clearer and more friendly for such organizations.

While the IRS gives tax-exempt status to public journalism organizations such as Pro Publica and National Geographic, the working group says in recent years it has become inconsistent and slower in its approvals. Plus, the department’s tax rules don’t regard news and journalism as “educational,” making it even harder for nonprofit news groups to get tax breaks.

“Over the last several decades, accountability reporting, especially at the local level, has contracted dramatically, with potentially grave consequences for communities, government accountability, and democracy,” the group’s chair Steven Waldman said in a press statement. “Nonprofit media provides an innovative solution to help fill this vacuum, but only if the IRS modernizes its approach.”

The group says the tax-related problems stem from the IRS relying on rules that were developed in the 1960s and 1970s and are in need of updating. Those rules treat nonprofit media organizations not much differently from commercial operations.

In a press conference hosted by the Knight Foundation and the Council on Foundations at Washington DC’s Newseum today, the group highlighted five key problems with the current IRS approach to granting nonprofit status.

  1. Applications for tax-exempt status are processed inconsistently and take too long.
  2. The IRS approach appears to undervalue journalism by sometimes not viewing it as “educational.”
  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.

The group makes a number of recommendations in its report in order to help distinguish nonprofit media organizations more clearly from commercial operations. Among the recommendations are suggestions to define news and journalism as “educational” under tax-exempt rules, and for the IRS to ignore irrelevant operational similarities to for-profits.

The Nonprofit Media Working Group’s report is the latest in a series of attempts to save public-service journalism as the news industry continues to be gutted amid a disruption brought on by the digital era and the decline of print and traditional ad-supported models. In San Francisco, a Knight Foundation-backed incubator called Matter Ventures is trying to encourage innovation in public media with a Silicon Valley-style mix of venture capital and mentorship. Meanwhile, other independent organizations such as Pro Publica and the Texas Tribune have formed partnerships with existing news organizations such as the New York Times and instituted a membership model, whereby their journalism is supported by contributions. Commercial media groups such as the New York Times (TimeSpace), BBC Worldwide (Labs), and Turner (Media Camp) have also taken on a role of fostering innovative startups that could improve public service journalism.

The multi-pronged assault to save public media is necessary. For now, it is proving only just enough to withstand the potentially larger force of commercial carnage. Tax breaks won’t be enough on their own, but they will help.

[Picture from Matter.vc]