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CHICAGO NEWS NONPROFIT TO 'SUSPEND'.

A reticence by the Internal Revenue Service to rule on where the sudden spate of news nonprofits around the country fall in the tax code created on fatality last week, as The John D. and Catherine T. MacArthur Foundation decided that it wasn't comfortable with the legal status of the Chicago News Cooperative and would provide further grants only for specific projects, not general support.

The cash-flow problem in turn caused the New York Times to pull its support from the CNC, which on Friday said it would stop providing content for the Times' twice-weekly local Chicago editions and would "suspend" its web site effective next Sunday.

"We never recruited the kind of seven-figure donations from people of means concerned about the declining quality of news coverage around the country," wrote CNS Editor and Chief Executive James O'Shea on the group's web site today. "As a result, CNC never raised the resources to make investments in the business side of our operation that would have generated the revenue we needed."

CNC had worked around not having IRS nonprofit status by handling its donations through WTTW-TV, a Chicago public TV station and most of its operating funds came from the MacArthur Foundation, the Chicago-based $5,000 million organization which doles out more than $200 million in grants annually.

According to reporting in the Wall Street Journal, a MacArthur lawyer decided in recent days that the lack of a true IRS ruling on CNC hobbled the foundation's ability to provide operating funds. The paper said O'Shea pulled CNC's most recent grant request following the foundation's decision.

The New York Times reported on its web site yesterday that CNC asked the Times "to contribute more, but both parties concluded that 'did not make economic sense,' Mr. O'Shea said in a telephone interview Sunday."

CNC was started in October 2009 by O'Shea, a former managing editor of the Chicago Tribune and editor of the Los Angeles Times, and employed seven full-timers and about the same number of part-timers.

Ironically, the self-same MacArthur Foundation said last Wednesday it had provided a $1 million grant to Berkeley's Center for Investigative Reporting, a news group that was founded in 1977 and given IRS nonprofit status a year later. The grant was part of MacArthur's Creative and Effective Institutions project and CIR said it would use the money for "capacity building and sustainability."

CIR and another nonprofit news group, the Bay Citizen, are in the midst of a 30-day evaluation of whether they will merge. Should they agree, they will create a nonprofit news group with about 60 employees and an annual budget of $6 million.

Since each of the local dozen-plus nonprofit news groups around the country is organized differently, the lack of an IRS ruling isn't a death knell -- yet. But like MacArthur, a number of the funders are getting impatient.
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Publication:NewsInc
Geographic Code:1U3IL
Date:Feb 20, 2012
Words:475
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