Mark Fitzgerald of E&P says the 3,00-circulation Point Reyes Light in west Marin County is using a new ownership model called L3C that might save some newspapers from closing. By incorporating as a L3C, or low-profit limited liability company, papers could continue to operate as if they were for-profits, but also allow them to accepted tax-deductible donations and foundation money. But no newspaper has tried L3C ownership until now, Fitzgerald writes.
- But with an L3C, a high net worth individual could donate to a newspaper and get a 50% tax break. And the newspaper is allowed to turn a profit, so long as its primary purpose is to advance some public benefit.
- The hang-up has been that the IRS has generally refused to recognize reporting on the news as the kind of social or educational benefit necessary to qualify for tax-deductible donations.
- But Kim Butler, the Vermont attorney who set up the Light L3C, believes this structure will work not just in Point Reyes but for other newspapers, too. “There are certain parts of the newspaper component that work well with in the educational benefit of an L3C,” she says.