Can the New York Times accept charitable donations?

Can the New York Times accept charitable donations?

Can the New York Times accept charitable donations?

Answers to your questions about the news.
Oct. 21 2009 1:41 PM

Spare a Dime for the Times?

Can needy newspapers accept donations?

The New York Times announced Monday that it plans to cut 100 newsroom jobs—about 8 percent of the total—by year's end. Distressed commenters on the Times Web site have expressed their willingness to pay more for online content or even donate.  Can the Times, a publicly traded company,accept donations?

Yes. Any company can accept money from eager customers. But whereas benefactors of nonprofits can claim charitable deductions on their taxes, supporters of for-profit ventures like the Times cannot. Indeed, the IRS would qualify such contributions as gifts rather than donations. It follows that there's a financial incentive to donate cash to even prosperous charities, but not to the ailing paper.


Of course, the Times could accept deductible donations if it were a nonprofit company. In March, Sen. Benjamin Cardin of Maryland introduced the Newspaper Revitalization Act, a bill that would allow for-profit newspapers to redesignate themselves as nonprofits. Advertising and subscription revenue would then be tax-exempt, and all contributions would be deductible. The bill hasn't yet moved forward in Congress, nor is it clear how a debt-saddled, money-losing newspaper could reorganize itself as a viable nonprofit. Also, nonprofit status would engender considerable changes at the Times: Any tax-exempt organization is prohibited from making political endorsements (though political reporting is fine). A nonprofit can take positions on public policy issues but must avoid advocating a candidate, even implicitly. 

Newspaper Revitalization Act aside, becoming a nonprofit can be prohibitively expensive. In order to reorganize, a corporation must first liquidate its assets—the proceeds of which are taxable. Alternatively, the major shareholders could donate their stock to a newly formed or existing foundation. (Those unwilling to donate their shares could be bought out.) This nonprofit foundation would control the Times as a taxable, for-profit corporation (which can make political endorsements) and could accept deductible donations. This setup already exists: The Poynter Institute, a nonprofit educational institution, owns the St. Petersburg Times.

To entice donors, the newspaper could also conceivably reorganize itself as a low-profit limited-liability company (L3C), a sort of happy medium between for-profit and nonprofit status. An L3C is run like a regular business, but its stated objective is something socially beneficial, with profitability as a secondary goal. Americans for Community Development, a coalition of organizations promoting L3C, have singled out newspapers as possible beneficiaries of this status. The catch here is that, as of yet, only a handful of states recognize L3C status. New York, where the Times is based, does not, and neither does the federal government.

Got a question about today's news? Ask the Explainer.

Explainer thanks Brian Price of Harvard Law School and A.L. Spitzer of Ropes & Gray LLP.