Journalism Organizations Getting Tax Exemptions
As you may have heard, the 2019 federal budget implementation bill establishes tax incentives for a new category of registered journalism organizations. The most high profile example of this change is La Presse, whose change to nonprofit status has been widely documented and discussed.
Much like charities, these organizations will enjoy broad taxation exemptions, will have the right to issue official tax receipts for gifts they receive, and will be entitled to receive donations from other charities and foundations. The bill also includes a partial reimbursement of journalist salaries for eligible organizations.
There has been some debate about whether this is a positive change or not. On the one hand, journalism as an industry is in desperate need of more sustainable financial models, and the financial crash of many newspapers is already a real problem for the quality of our democratic life in Canada. It might also offer an easier path for independent media outlets to make their way in a very competitive market.
On the other hand, some people have questioned whether this move threatens the freedom of the press (by tying their economic interests to the Canada Revenue Agency), or whether most of the money will end up going to mainstream outlets anyways. It is a model that is already widespread in the United States (including the Associated Press).
Registration Process and Criteria for Journalism Organizations
To become a registered journalism organization, organizations will have to apply and be approved by the Canada Revenue Agency (CRA), again like charities. The eligibility criteria for registration for these new entities includes:
- having purposes that are exclusively related to journalism;
- not receiving gifts from any one source in a taxation year that represent more than 20% of the organization’s total revenues, with some exceptions;
- satisfying a number of conditions that are similar or identical to those for registered charities (including being not for profit); and
- having been designated as a Qualified Canadian Journalism Organization (QCJO).
This last criterion, namely being designated as a QCJO, in turn, comes with its own set of eligibility criteria, which notably include:
- being primarily engaged in the production of original news content, which
- must be primarily focused on matters of general interest and reports of current events, including coverage of democratic institutions and processes, and
- must not be primarily focused on a particular topic such as industry-specific news, sports, recreation, arts, lifestyle or entertainment;
- regularly employing at least two journalists in the production of its content;
- not significantly producing content to promote an organization, goods or services, or a government agency;
- satisfying Canadian ownership restrictions; and
- operating in Canada, including that its content is edited, designed and, except in the case of digital content, published in Canada.
One implication of these criteria is that although the budget bill does require journalism organizations to be primarily engaged in producing original written news content in order to be eligible for a separate new tax credit (so that it offsets certain salary expenses) this condition doesn’t apply when registering for the new charity-like status that is the subject of this post.
Another feature of the new law is that it is not specific to any particular medium. Podcasts, for example, in principle appear to be just as eligible as written news organizations for the charity-like status (however, not for the salary reimbursement, which requires the organization be involved in written news content).
The other implication of these criteria is that is creates a notably different model than that in the United States, where most nonprofit journalism organizations are precisely made for specific topic/niche issues, and are sponsored by specific organizations or agencies.
Probably the most immediate concern facing organizations who’d like to take advantage of this new regime is that it’s not clear they will be able to do so. Despite that these measures have been announced to take effect as of 1 January 2020, even if the budget bill is passed in its current form before Parliament dissolves before the fall election, it’s unclear when they will become practically available.
The reason for this is that the entity that will be responsible for granting QCJO status has yet to be identified: Bill C-97 simply empowers the government to adopt regulations at some later point to establish this. If the government decides to construct a new entity for this purpose, this could take some time. As noted above, CRA cannot grant registered journalism status to an organization unless it has first been designated as a QCJO – but the process for receiving this designation does not exist as of yet.
Even once this apparatus is in place, the requirement to regularly employ at least two journalists will be a difficult bar for many independent media organizations or media startups to clear.
Finally, serious concerns have also been raised by commentators about the risks to press freedom and independence when the government is given the power and discretion to determine which media organizations will receive preferential economic treatment, and those which will not.
What do you think? We’d love to hear some thoughts from organizations who are already registered charities on the impact this might have on the sector overall.
Thanks to our collaborator Mark Philipps for writing this blog post! Mark Philipps is a Montreal based lawyer who can be reached at email@example.com.