In Part I, we examined the emergence of online nonprofit newspapers and nonprofit investigative journalism venues, suggesting a potential new direction for U.S. journalism.  Is the conversion of a for-profit newspaper to a 501(c)(3) public charity an answer for the future survival of newspapers?  Will the legislation introduced by Senator Ben Cardin (D-MD) and Congresswoman Carolyn Maloney (D-NY) help newspapers find their way to becoming nonprofits?

Plenty of for-profit newspapers are foundering or have tanked this past year, notably the Seattle Post-Intelligencer (reorganizing to downsize drastically and be online-only), the Rocky Mountain News, the Baltimore Examiner, and the San Francisco Chronicle, and others such as the Tribune Company (owner of the Baltimore Sun, the Chicago Tribune, and the Los Angeles Times, for example) and the Philadelphia Inquirer have filed for bankruptcy protection.

Reporters and others have discussed the possibility of a nonprofit angel to rescue the Chronicle, initially made available for a pricetag of $660 million and nonprofit models to fix the ailing Boston Globe, the latter on the sales block until earlier this month ; one of the bidders for the Globe had indicated he would set up a nonprofit to own and manage the paper.

Would Cardin’s bill possibly save these papers? The legislation doesn’t appear to be making much headway on Capitol Hill . Cardin has one cosponsor in the Senate, and a companion bill introduced by New York Congresswoman Carolyn Maloney similarly has attracted only one person to join her.

Cardin’s bill would allow newspapers under some circumstances to operate as educational nonprofits, that is, advertising and subscription revenue would be tax exempt and these nonprofit-like newspapers could receive tax deductible charitable and philanthropic contributions.  To qualify, newspapers would have to engage in “the preparation of the material contained in such newspaper follows a methodology generally accepted as educational” and would not be allowed to make political endorsements.  Such tax-exempt newspapers would have to ensure that the amount of space devoted to advertising does not exceed the space devoted to “educational content.”

The benefits to a newspaper are simple and obvious: eligibility for foundation grants and program related investments (PRIs) and for U.S. Postal Service nonprofit postage rates.

Is there a downside to the bill?  There is certainly no evidence of a wave of great enthusiasm.  At Congresswoman Maloney’s hearing on September 24^th concerning her and Cardin’s bills, only three of the twenty House and Senate members showed up to hear the testimony and ask questions.

Paul Starr of Princeton University’s Woodrow Wilson School of Public and International Affairs offered a perspective about how to look at questions concerning the press.  Because U.S. democracy is so dependent on a functioning press, he suggested that newspapers could not be compared to other industries regarding questions of subsidy, whether governmental cash or infusions of charitable and philanthropic giving.

Starr offered three principles for the Committee’s consideration: “[First], any subsidies must be viewpoint-neutral; they cannot favor one viewpoint over another. Second, they should be platform-neutral—they should not favor print media over online media, for example. And, third, they should be neutral or at least reasonably balanced as to organizational form.”

Starr obviously knows the meddling, controlling nature of foundation grantmakers.  For the kind of dollars that newspapers need (for example, the Boston Globe has a pension liability of $51 million and, prior to recent union concessions, faced an $85 million operating deficit this year). He called for a government subsidy such as an exemption from the payroll tax that would be “platform-neutral,” that is, available to all forms of journalism, not just print newspapers.

The right wing has savaged the Cardin bill as a “government bailout” of the newspaper industry in the footsteps of the bailout of banks, auto manufacturers, and AIG.  It’s not, there’s no money in this bill.  But the brevity of the bill (making one think it is more of a “statement” bill expressing concern than a bill with a workable solution) raises a number of questions:

• Who gets assisted?  Cardin’s staff say that the bill intends to provide nonprofit status to locally owned newspapers as opposed to newspaper conglomerates, but his own Baltimore Sun is owned by the Tribune Company.  Does the Tribune-owned Sun get to go nonprofit but some other Gannett paper fail to qualify?  It’s easy to sense where Cardin is heading, thinking about the potential loss of the Baltimore Sun, but the question of giving subsidies (in the form of tax exemption) to newspapers currently run by giant corporations is going to strike much of the American public as wrong, especially in the wake of upcoming bank compensation packages.  Cardin may know what he wants the bill to do, but its skimpy text makes you think that the big press corporations will be licking their chops. You know they’ll find the loopholes here.

• Just seeing Steiger’s half-million dollar salary at ProPublica should serve as a reminder that many people in newspaper corporations are hardly underpaid.  But there is nothing in the Cardin bill that would prohibit newspaper fatcats from taking mammoth salaries from nonprofit operating costs as opposed to profits.  Of course Steiger’s salary exceeds the pay levels of most journalists by an extra zero at the end.  But some big newspapers that are reportedly in trouble (and some that are not) do pay pretty hefty salaries and haven’t cut back on those levels despite declining circulation and advertising during the recession:  the reported salary of Katharine Weymouth was raised to $500,000 in 2008 when she was named publisher of the Washington Post (she had been paid $220,000 plus a bonus of $108,000 as the Post’s vice president of advertising, while several others as the Post topped $400,000; Bill Keller, the New York Times executive editor, earned $650,000 in 2005, slightly higher than the $600,000 paid to the editor of the New York Post. If newspapers convert to charitable status, what salary levels might be considered too high (a question that of course applies to other charities too, though the question applies even more strongly to other “nonprofit” subsectors such as hospitals and universities, some paying seven-figure salaries to their CEOs)?

• Newspapers traditionally take political positions and advocate forcefully for legislation.  But IRS code limitations that nonprofit lobbying regarding legislation, taking positions on candidates for electoral office, and publishing statements on behalf of candidates for public office could put many nonprofit newspapers in a bind. Although some see the political endorsement role of newspapers as a quaint anachronism (who ever votes for a candidate because of an editorial page endorsement?), many people inside the industry see newspapers’ ability to write up candidates pro and con and to advocate and engage in legislative advocacy as crucial press functions—and potentially at risk in the Cardin legislation.

• Cardin’s press focus is limited to ink-on-paper journalism.  We know what he is trying to save, but media coverage of the news is much more diverse than printed newspapers.  The lack of platform-neutrality in the Cardin bill makes it feel sentimental rather than practical, an attempt to improve on the buggy whip when the nation is tapping other, more diverse and modern modes of transportation—or in this case, journalism.

There is no question that Cardin’s (and Maloney’s) bill attempts to address a serious issue related to the health of our democracy, the vital role of the Fourth Estate as a watchdog on the executive, legislative, and judicial branches of government at all levels of society.  An emasculated Baltimore Sun, whose newsroom has shrunk from 420 when the Tribune bought the paper in 1999 to 148 this past April, is a loss for democracy, not just for news coverage in Maryland’s Charm City.  The Cardin bill may be the starting point for a national conversation about whether and how to save newspapers like the Sun, but it is not the comprehensive answer.