IRS Grants The Salt Lake Tribune Tax-Exempt Status
In an interesting new development, the IRS granted 501(c)(3) tax-exempt status to a major daily newspaper. On November 3, 2019, the Salt Lake Tribune announced that it had incorporated as a non-profit corporation, re-structured its operations, and obtained IRS recognition of its 501(c)(3) status. Tax-exempt practitioners have speculated for years that a daily newspaper could, in theory, qualify for tax-exempt status under Section 501(c)(3). However, the Salt Lake Tribune’s announcement was the first time that a major daily newspaper is known to have succeeded in obtaining recognition of 501(c)(3) tax-exempt status. Granting tax-exempt status to this daily newspaper means that the IRS has now officially recognized news-reporting as an exempt purpose.
In the publishing field, the lines between for-profit and tax-exempt activities can be blurry. The differences between for-profit and tax-exempt publishers of similar content may be so subtle that they are actually indiscernible to the general public. The same book or magazine could be published by a multi-million dollar, global for-profit company or a small, tax-exempt non-profit. Provided the publication’s content furthers an exempt purpose, publishing companies can generally be structured as either a for-profit or a tax-exempt organization. Typically, tax-exempt publishers promote educational, religious, or scientific purposes through the content of their publications. Exempt “educational” purposes can be broadly construed to include virtually any topic that disseminates knowledge to the public. Under this definition, daily newspapers would seem to qualify. The IRS’s decision to grant tax-exempt status to the Salt Lake Tribune confirmed that news-reporting, does indeed, qualify as an exempt educational purpose.
It is not clear why it has taken this long for the IRS to grant tax-exempt status to a daily newspaper. Perhaps, the IRS has not received many applications for this status because, until recent years, newspapers have been profitable enterprises. However, it is also possible that newspapers applying for tax-exempt status were simply not structured properly to qualify for it. It is also foreseeable that an applicant seeking tax-exempt status for an existing newspaper could face IRS scrutiny due to its status as a successor to a for-profit business, excess benefit concerns, or the “commerciality doctrine” which is an IRS- created doctrine that has at times been used to deny or revoke tax-exemption. Another reason yet could be a shift in how the IRS views newspapers. Or, perhaps, due to changes in the news industry that threaten daily newspapers, the IRS is seeking to preserve a dying industry that serves a public good. Regardless of the actual reason, we now know that news-reporting is an exempt purpose that can qualify for 501(c)(3) tax-exempt status.
We have extensive experience with both for-profit and tax-exempt publishing and publishers. Please contact our firm if you have questions or need assistance.
This article is provided for general information and should not be relied upon as legal advice for a specific situation. If you are in need of specific advice or legal representation, please do not hesitate to contact us.
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