In contrast to the US, where news organizations can enjoy the benefits of tax-exempt status, philanthropic funding for journalism remains restricted in both Canada and the UK. However, recent developments reflect a parallel interest in the impact of the internet on print journalism, the proliferation of ‘fake news’, and the power of tax incentives.
Incentivizing truth and democracy
Not every country gives charitable or philanthropic tax incentives, but those that do tend to be aimed at: encouraging giving and subsidizing the operations of certain organizations. Public policy determines which purposes should be tax-preferred since relief essentially allows donors to redirect part of what would otherwise be public revenue to the eligible organization they choose.
Unlike investment incentives to support particular private sectors (film, gaming), the introduction of additional philanthropic tax incentives is fairly rare. For this reason it is especially interesting to chart recent developments in the UK and Canada.
Both the UK and Canada can trace their charity law to the 1601 Statute of Elizabeth, which recognized four ‘heads’ of charity. However, it is the UK that is slowest to recognize public interest journalism.
Back in 2012, the House of Lords Select Committee published a report suggesting charitable status for certain types of journalism could unlock philanthropic investment and enable them to flourish. Its principal message is also evident in the Cairncross Review published in February: high quality news matters for the ‘wellbeing of democracy’.
The 2019 Cairncross Review outlines the challenges of the current market and culminates with nine recommendations. While several of these are focused on commercial news, social media and the imbalance between publishers and online platforms, the one of particular interest to the philanthropy sector is that tax incentives should be introduced. The recommended route is statutory amendment to include a new charitable purpose. This would be a departure from the US model, where news organizations are generally recognized as ‘education’.
Considering the 400 years that have passed and the vastly changed societal circumstances, the current list of recognized purposes across the UK is short and very slow to expand (usually by analogy). However, it may be that political will exists, even with Brexit dominating the legislative landscape. There has already been some encouraging endorsement in Parliament, though only time will tell.
Across the Atlantic, developments are more concrete.
The 2019 federal budget introduced a new category of ‘registered journalism organization’ which will, from January 1, 2020, be exempt from income tax and have the ability to issue donation tax receipts. A new independent panel will establish eligibility criteria for the recognition of such Qualified Canadian Journalism Organizations (a ‘QCJO’).
A QCJO would have to be primarily engaged in the production of original news content focused on matters of general interest and current events, including coverage of democratic institutions and processes. There is no requirement that the QCJO exist to ‘educate’. The QCJO would be a Canadian corporation or a trust (if a corporation, it would be incorporated in Canada, and its chairperson or presiding officer and at least 75 per cent of its directors would be Canadian citizens) operating in Canada, although worldwide digital publication of its content would of course be allowed.
Furthermore, the QCJO will need to have purposes exclusively relating to journalism, its business activities will have to relate to those purposes, all directors will have to be unrelated to each other, the QCJO must be controlled by a group of unrelated persons, no one donor can represent more than 20 per cent of total gifts received in a year (other than gifts from bequests or on initial establishment), and no part of its income can be payable or available to a member, shareholder, director, trustee or similarly connected individual.
How will the QCJO be structured in practice? La Presse, the major French-language newspaper in Quebec, restructured itself in 2018 following earlier announcements regarding charitable status, and is now owned by a new non-profit social trust with the stated purpose of promoting La Presse’s mission of journalistic quality. Following the introduction of the new 2019 rules, it may be that La Presse and some other news organizations will adopt a multi vehicle structure going forward that allows them to empass a QCJO as well as a trust (or a second corporation) separate from the operating company to segregate donations.
While comparisons have been odious since well before the Statute of Elizabeth, it is interesting to consider how the UK and Canada may be tackling a truly global phenomenon by departing from the ‘education’ route favored in the US.
Alana Petraske is an English solicitor and partner at Withers Worldwide in New York.
Daniel Frajman is a partner with Spiegel Sohmer Attorneys of Montreal