Monday, October 3, 2011

Why Media Matters remains a tax-exempt 501(c)3?

There's a big stink on Fox as to why Media Matters remains a tax-exempt (501(c)3) organization seeing as they've "declared war" on Fox. The answer really isn't that complex, and I think it's fair to say Fox's coverage of this is a tad artful...but then again, Media Matters *has* declared war on Fox.

One might say that if you declare war on the big kids, you've got to expect to take some lumps.

For the unfamiliar, 501(c)3 refers to a specific section of the tax code that very specifically defines which organizations are "tax exempt", or more accurately, which organizations may receive tax deductible donations.

Because it's so specific, even a lay person (like me) can take a stab at understanding the code and getting it right.

If you're starting up or operating a 501(c)3 (and there are other 501 organizations, each with their own benefits, worth considering instead) you have some limits on how you may operate and what you may do.

Your bright shiny new organization must fall within the purposes permitted - i.e., you can't just start the Society of Belly Button Lint Collectors and achieve 501(c)3 status.

The group must be founded for purposes related to charitable, religious, educational, scientific, literary, public safety testing, fostering national or international amateur sports competition, or preventing cruelty to children or animals.

The fine folks at the Infernal Revenue Service tell us that the term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

In other words, just to start the critter, you need to follow some rules and keep following them.

Once founded, however, more rules apply. The organization must not

1) Be organized or operate for the benefit of private interests (in other words, the nice money can't end up funding a private organization or person).

2) Attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.

That's it, as far as I understand it, as far as 501(c)3 and its' attendant bozo no-no's go.

Media Matters has declared war on Fox, a private organization. They have not attempted to solicit legislation (to the best of my knowledge) or run candidates as part of their tactics. They have not been found to have diverted funds for private benefit.

In the busy little check box on the 501(c)3 application form, they checked "educational" as their purpose. And regrettably enough, they are acting to "educate" the general populace and, more tactically important, Fox's advertisers that "Fox is bad, m'kay?".

This may not be *nice*, but IMHO, is well within the rules. So, as Fox talking heads ask with great dudgeon "why hasn't the IRS done anything when all these citizens are sending in complaints" the answer is fairly straightforward, and likely understood by the nice lawyers at Fox (who may be off in an isolated room at Fox HQ thumping their forehead against the wall in frustration)...i.e., "they aren't doing anything that violates the terms of their charter, dummy!".

Given that for good or ill, one cannot accurately describe the leadership of Fox as either stupid or legally uninformed the question becomes..."what are they doing?"...

Well, I can only offer a few suspicions...

Having found themselves, and their advertising revenue stream, under attack they may have decided to strike back - both in the court of public opinion ("HEY! No FAIR!") and possibly in the far more dangerous arena of congressional action, perhaps laying the groundwork to further restrict the actions of 501(c)3 groups and their participation in the public exchange of ideas by campaigning to change the tax code.

Unlike Media Matters, Fox *can* do that. Fox can endorse or support politicians, donate (or solicit donations for) political candidates, take positions on ballot measures, and more - it's a *private* organization, a body of individuals that do not suffer under the restrictions of 501(c) while money that folks give them (for goods and services) isn't tax deductible (nor should it be), a private organization can be as political as it wants to be barring other provisions of law.

In other words, Fox (and NBC/ABC/CBS/etc) all have bigger and better hammers that a 501(c)3...and Media Matters has volunteered to be hammered.

Ooops. I may not agree with what I suspect will be Fox's techniques, and be particularly worried about unintended consequences - but I recognize that Media Matters may well have made an organizationally fatal mis-step.

1 comment:

Old NFO said...

Concur... Good post and good 'simplification' of the issues!