Non-profit news operations have their own pitfalls

(Nev.) The Nevada Independent, a new online news site established by former reporters of the Las Vegas Review-Journal, has a link from its front page where they list all of the people who have given money to the startup.

It is a long list, beginning with about 25 or so individuals that contributed $5 and ending with a pair of $250,000 contributions from MGM Resorts and Switch Communications, a Las Vegas-based cloud service provider.

The intend is clearly to provide transparency and to suggest to readers that the editors and reporters at the Independent are free from outside influences. This would appear to be in direct contrast to their former employer, the Review-Journal, which was bought by billionaire and GOP activist Sheldon Adelson in 2015.

Most journalists around the country shuttered the day it was revealed that Adelson had bought the Review-Journal and most are cheering on the staff at the Independent. But as a pathway for delivering news in the future, the non-profit as a business model remains rife with questions.

The Nevada site isn’t alone, there are a number of examples in the industry, most notably ProPublica, California Forward and the Marshall Project. While each is web-based and able to run operations far more efficiently than legacy newspapers with all the presses and paper and pensions – the non-profits must also engage in never-ending fundraising. And just as the editors and reporters working for National Public Radio are realizing as the Republican-led Congress considers President Trump’s massive cuts to NPR – when a non-profit loses its angel, the doors can close quickly.

But there is something even more problematic, the actual tax status of the enterprise. Most of the news-based non-profits are exempt from taxation under Section 501(c)(3) of the U.S. tax code, which is limited by the IRS to only some activities: charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports.

It wouldn’t hard to argue that most well-reported news stories fall into the educational category. And yet, as witnessed by the ongoing battles between the mainstream press and Trump White House – one man’s source of education is another man’s “fake news.”

At some point, the IRS may look more closely whether news operations actually qualify under 501-c-3.

Finally, there’s a question about the source of money. That is, just because it’s being donated without strings attached doesn’t mean it isn’t also conditioned. Large, philanthropic foundations frequently provide big grants to news operations to help fund specific reporting activities.

Typically the grants are tied to some major public policy concern – like early learning or failing water supplies. Sometimes donors want fairly specific agreements before the money is given, assurances that a reporter will be hired and assigned to their topic of interests.

On the surface, there’s nothing inherently wrong with such agreements but they aren’t also typically made available to the public either. Which brings us back to the Nevada Independent and its’ quest to be transparent. The $250,000 given to the editors by MGM Resorts – there’s plenty of room to question their motives given the company’s rivalry with Sheldon Adelson and his Vegas properties.