Industry watches as noted California weekly newspaper adopts 'low profit' status

In May we reported that the Point Reyes Light in rural western Marin County, California, was sold to a group of journalists, educators and community leaders who hoped to operate it as a "low-profit limited liability company," known as an LLLC, or L3C. Now the eyes of many in the newspaper industry are pointed at the Light to see if the L3C model, which allows the paper to operate as a for-profit but accept tax-deductible donations and foundation money, could help newspapers elsewhere, Mark Fitzgerald reports for Editor & Publisher. (Census Bureau map)

The Light, circulation about 3,000, has attracted a disproportionate amount of attention for a newspaper its size after winning the 1979 Pulitzer Prize for Public Service, Fitzgerald writes. The new ownership group said the L3C model was their only choice after a competing weekly entered the market. "We were networking with different appraisers who told us, you’re market isn’t even big enough for one for-profit paper," biologist Corey Goodman, one of the new owners, told Fitzgerald.

"With an L3C, a high net worth individual could donate to a newspaper and get a 50 percent tax break," Fitzgerald writes. "And the newspaper is allowed to turn a profit, so long as its primary purpose is to advance some public benefit." The problem is the Internal Revenue Service has been reluctant to "recognize reporting on the news as the kind of social or educational benefit necessary to qualify for tax-deductible donations," Fitzgerald writes. Still, Kim Butler, the Vermont attorney who set up the Light's L3C, believes this structure will work for newspapers across the country.

While the Light is the first newspaper to use L3C status, it hopes to model its structure after the Poynter Institute in Florida. "Frankly, we were taking a cue from how the Poynter Institute operates the St. Petersburg Times in terms of its social and educational purposes," Butler told Fitzgerald. Goodman explained, "Kim told us if the only thing we were doing is operating that newspaper, it’s not going to fly. Like the Poynter Institute, you have to have publications and other educational things. Well, that’s exactly what Mark and I want to do." (Read more)