In considering different business models for news, that is how news is funded, it is necessary to look at financial information. Being exempt from tax is one reason that not-for-profit structures may be viable.
Also, not-for-profit publishers in the U.S. are eligible to receive tax-deductible donations. That’s not the case in Canada.
Online not-for-profit news organizations like the Voice of San Diego and MinnPost.com are in the IRS’s list of organizations that can receive charitable contributions.
Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986, is a list of organizations eligible to receive tax-deductible charitable contributions.
— Search for Charities, Online Version of Publication 78 IRS
In comparison, publications like the Tyee in B.C. request donations to funds held with a foundation that then offers grants for individual journalists to do work. It is a legal but roundabout way of funding operations and very restrictive.
When the Tyee was trying to raise funds for its provincial election coverage, contributions were not tax-deductible.
Political activity is not considered charitable by the Canada Revenue Agency.
The main reason why the courts rule out political purposes for charities is a result of the requirement that a purpose is only charitable if it generates a public benefit. A political purpose, such as seeking a ban on deer hunting, requires a charity to enter into a debate about whether such a ban is good, rather than providing or working towards an accepted public benefit.
It also means that in order to assess the public benefit of a political purpose, a court would have to take sides in a political debate. In Canada, political issues are for Parliament to decide, and the courts are reluctant to encroach on this sovereign authority (other than when a constitutional issue arises).
— 4. The difference between political purposes and charitable purposes Political Activities CPS - 022 CRA
In Canada, an organization needs to have approved and solely charitable objects to be able to issue tax receipts. The definition of what is charitable by common law comes from a 19th century court ruling Commissioners for Special Purposes of Income Tax v. Pemsel, 1891.
Pemsel categories include:
- purposes for the relief of poverty;
- purposes for the advancement of education;
- purposes for the advancement of religion; and
- other purposes beneficial to the community in a way the law regards as charitable.
— Guidelines for Registering a Charity: Meeting the Public Benefit Test CPS-024 Canada Revenue Agency
Here is a part of the actual ruling from 1891:
“Charity” in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads.
— Commissioners for Special Purposes of Income Tax v. Pemsel, 1891 CanLII 21 (ON C.A.)
I haven’t found an explicit restrictions against news publishing as charitable in Canada. Many would says that since news contributes to the public good, it may be possible to consider it charitable.
The restrictions against political activity would narrow allowable content for the hypothetical charitable news publisher. This similar restriction exists in the U.S. for endowed institutions, as acknowledged in the Ackerman and Ayres piece.
The implication of this policy difference between these neighbouring countries may mean that a not-for-profit structure is far more attractive in the U.S. because it could rely on a more motivated base of donors. I expect we will find more support for the viability of the structure for news in Canada, just with a colder climate for donations.
