Senator proposes bill to give newspapers tax-exempt status

Posted by Caroline Huber on March 25, 2009 at 9:33 AM

Maryland Senator Benjamin Cardin proposed a bill on Tuesday that would allow newspapers to operate as tax-exempt non-profits. Under the Newspaper Revitalization Act, newspapers would be organizations eligible for 501(c)(3) status, the same status public radio and television have now, and could adopt the Low Profit Limited Liability Company business model (L3C).

Cardin believes immediate action is necessary to preserve the American newspaper. "We are losing our newspaper industry," Cardin said in a statement. "The economy has caused an immediate problem, but 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.

Cardin's legislation would make advertising and subscription revenue tax-exempt and contributions to the papers tax deductible. It would also permit non-profits to invest in newspapers. Non-profit newspapers could still cover political issues, but they would not be allowed to make political endorsements. Cardin said in a statement that the bill is targeting the preservation of local newspapers, not large newspaper companies.

According to the Associated Press, President and chief executive officer of the Newspaper Association of America John Sturn supports the bill, saying it "recognizes changes in the law might be necessary to provide a boost to newspapers trying to weather this difficult economic period."

Cardin realizes that the legislation might not work for all newspapers, but he considers the initiative a starting point for government discussions on ways to help the newspaper industry. However, this is not the first proposal for government intervention as last week House Speaker Nancy Pelosi urged the U.S. Justice Department to change newspaper anti-trust laws. Unlike Pelosi's proposal, Cardin's bill targets the preservation of local newspapers, not large newspaper conglomerates, whereas relaxing anti-trust laws would allow large media companies to purchase independent papers.

As ideas abound in Congress and the Senate for legislation to save the newspaper, some government intervention in the industry seems inevitable. Cardin and Pelosi agree that rescuing the American newspaper is of paramount importance. Cardin says, "As local papers are closing, we're losing a valuable tradition in America -- critically important to our communities, critically important to our democracy." However, the question is not only how the government will save the newspaper, but apparently which part of the industry it will save: will it be large newspaper companies or small independent newspapers that receive the government's help?

Source: Editor and Publisher, Associated Press