Why letting the IRS decide the future of news is a bad idea

After nearly 150 years in business – as a business – The Salt Lake Tribune wants to become a nonprofit.

But first its owner must get approval from the Internal Revenue Service. The federal agency in charge of collecting taxes also gets to say which organizations may become nonprofits. If the IRS decides the Tribune’s mission makes it eligible to become a charity, the newspaper could rely heavily on donations as its revenue from ads and subscriptions continues to dry up.

This is happening as a nonprofit wave is spreading across journalism, something I’ve been studying for the last decade. But does it make sense for the taxman to make this important decision about the future of journalism? I don’t think so.

Nonprofit news

While some outlets, like Mother Jones, founded in 1976, have been nonprofit for decades, the sector exploded 10 years ago. It includes ProPublica, a Pulitzer-Prize-winning source of investigative reporting, and the Wisconsin Center for Investigative Journalism, a regional outlet aimed at improving reporting on the state of Wisconsin.

These organizations are primarily funded by foundation grants and donations from readers rather than subscriptions and ads. They tend to serve niche or hyperlocal audiences or do expensive and generally unprofitable investigative work. As is the case with The Conversation US, they often produce coverage that no commercial enterprise regularly provides.

A second, much smaller, group consists of newspapers that belong to nonprofits or churches. In Philadelphia, where I live, philanthropist H.F. “Gerry” Lenfest created a foundation and gave it the Philadelphia Inquirer and the Philadelphia Daily News, ensuring both newspapers will remain locally owned.

Businessman Paul Huntsman, the Tribune’s owner and publisher, is the first in the country trying a third option: making his newspaper itself a nonprofit.

A struggling industry

What isn’t debatable is that the business model for reporting and relaying the news is in big trouble. Newspaper ad revenue soared throughout much of the 20th century, peaking in 2000, and then fell off a cliff, dropping from US$48.6 billion to just $16.6 billion in 2017.

Circulation – the total number of papers sold – is down but the revenue from subscriptions and newsstand sales has grown. Newspaper sales generated $11.2 billion in 2017, up from $10.3 billion in 2007, though that didn’t begin to plug the hole caused by lost ad dollars.

The Salt Lake Tribune’s advertising revenue has also plummeted. It fell 40% while the number of its daily print subscribers dropped more than 60%, from 85,000 to 31,000, between 2016 and 2018.

As a result, U.S. newspapers employ far fewer people than they used to. The total number of their reporters, editors, photographers and film and video editors fell to 39,210 in 2017, a 45% decline from 2004.

But this doesn’t matter only to the journalists who can no longer find work in their profession. Most experts agree that high-quality journalism is essential to a functioning democracy. Without it, unsubstantiated rumors and sensationalism fill the void and mislead the public. The consequences can be dramatic, as evidenced by the misinformation-fueled movement against vaccinations now causing measles outbreaks.

A benefit for all

You benefit from the fact that local news exists, even if you don’t subscribe to your local newspaper. And you probably don’t. A 2018 Pew Research Center study found that just 14% of Americans said they paid for local news.