Preserving News Media Through a Charitable Donation

Preserving news media through a charitable donation

In January 2016, the owner of the Philadelphia Media Network (PMN), H.F. “Gerry” Lenfest, donated the entire Philadelphia Media Network (PMN), which is comprised of The Philadelphia Inquirer, Philadelphia Daily News, and Philly.com, to the nonprofit Institute for Journalism in New Media, part of the Philadelphia Foundation.

PMN was reorganized from an LLC to a public benefit corporation before it was donated to the Institute. The company will continue to operate as a for-profit business but it will engage in activities that further a public benefit. The Institute has a board of managers appointed by Lenfest, who will run the organization.

Pedro A. Ramos, President of The Philadelphia Foundation and a member of PMN’s board of managers said, “The Institute’s goal of contributing to the resilience of real, high-quality, independent journalism in the digital age is a critical endeavor for the civic health of our Greater Philadelphia community. We hope the vision and forward-thinking nature of this endeavor will inspire other philanthropists to think about how they may work with us to strengthen our community.”

It is no secret that the newspaper industry has had significant challenges for the past several years, and The Inquirer, Daily News, and Philly.com have struggled as much as or more than any metropolitan newspaper in the country over that time span. As many newspapers and media organizations seek solutions to maintain their viability in the communities they serve, Lenfest found an alternative to preserve journalism in the Philadelphia region.

Here are some key aspects and benefits of this type of arrangement:

  • The owners of the business donate their interest to a not-for-profit entity. Owners of news media organizations are very passionate about the industry and journalistic reporting. The ability to continue serving the public’s interest is usually of the utmost importance.
  • The business is converted into a public benefit corporation which engages in the traditional operations of the business but also engages in activities that serve a public benefit.
  • Owners of the donated business can receive a charitable contribution deduction based on the fair value at the time of the donation, although, there are limits to the deduction received by the individuals contributing the stock.
  • The donated entity must have the ability to continue to operate as a business, including the ability to pay its bills, pay taxes if profits are earned, and generally run like most businesses.
  • The corporation will typically have a board, which will run the entity’s operations, make key strategic business and operating decisions, and report to the not-for-profit board of trustees.
  • The objectives of the organization can be promoted in the community, which could result in charitable giving to the not-for-profit, thereby furthering the public benefit and interest.

When pursuing this type of strategy, the owners can choose between donating the business to an existing charity or to a newly-formed not-for-profit entity.

While execution of this type of transaction is complex, in the right circumstances, it can both preserve the legacy of the owners as well as the organization’s ability to continue to serve the public interest for years to come.

Richard Snyder can be reached at Email or 215.441.4600.

 

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