The new-and-improved payroll tax credit

The most recent version of the Build Back Better Act released by House leadership includes a payroll tax credit for local news organizations.

But not only that, it makes a number of changes that strengthen the legislation, including a number of provisions that the Coalition and other groups have been working through with the staffs of Senators Maria Cantwell (the lead Senate advocate) and Ron Wyden (chair of the Senate Finance Committee).

The heart of the bill is still a payroll tax credit for newsrooms that employ local journalists. It may provide as much as $25,000 in the first year and $15,000 each of the following years. The program runs for five years.

Here is a summary of the most important changes from previous versions:

Strengthens the focus on local news organizations and reporters covering communities. The credits can only go to news organizations the “primary purpose of which is to serve a local community by providing local news” to help subsidize the cost of local journalists doing the “gathering, preparing, directing the recording of, producing, collecting, photographing, recording, writing, editing, reporting, presenting, or publishing original local community news for dissemination to the local community.”

Includes broadcasters (public and commercial) who cover local communities.  The previous House version had included only newspapers and websites. The earlier Senate version had also included TV and radio.

Clarifies that the benefit is to help support newsrooms that have full-time local journalists.  The previous House and Senate versions made newsrooms eligible even if they had only a few hours a week of local reporting.

Reduces the risk of political interference by excluding local news organizations funded by political advocacy organizations of the left or right. Specifically, it excludes those owned or mostly funded by 501c4 organizations or 527 organizations, including political action committees. Previous House and Senate versions did not have this safeguard.

Limits eligibility to newsrooms that cover the community, employ local reporters, carry media liability insurance and disclose ownership. These will help ensure that the benefit goes to those news organizations that are actually intending to cover the community, not fake or fly-by-night sites set up to harvest the tax benefit.

Adds a limit on how much any particular corporation can receive (1,500 credits per corporation). This increases the percentage of the pie going to medium and small players. This was not in the previous House or Senate versions.

Eases participation of mom-and-pop local publications. Addressed technical legal issues that have made it hard for the smallest publications to participate.

Eliminated language that discriminated against nonprofit websites. Earlier language had defined news organizations in ways that applied only to commercial ventures.

Clarified ownership rules to ensure equitable treatment of newspapers that are part of chains. This was done by clarifying the “aggregation” rules, which had inadvertently excluded some local newsrooms owned by chains.

So, what exactly is in the House version of the Build Back Better Act? The payroll tax credit originally proposed in the Local Journalism Sustainability Act was included in the House of Representative’s latest version of the Build Back Better Act. You can read the text of the provision here.

Why the focus on the payroll tax credit? The payroll credit is the most direct benefit to publishers. In the Coalition’s benefit estimations, the payroll tax credit accounted for 50% of the overall benefit publications would likely see if the entire Local Journalism Sustainability Act is passed. ( Here is an example from our case study of The Afro-American.)

Including the payroll tax credit in the Build Back Better Act offers publishers a potentially transformative fund at a moment when they have been challenged by a pandemic and decades of financial free fall. It is the Coalition’s hope that the other two planks of the Local Journalism Sustainability Act — the small business credit and the subscription credit — will be passed in the future, but we applaud the inclusion of the payroll credit in the Build Back Better Act.

We urge the House to pass the Build Back Better Act with this included.

The Rebuild Local News Coalition advocates for public policies to create a stronger, more inclusive local news system. Its members include:

America’s Newspapers
National Newspaper Association
Institute for Nonprofit News
National Newspaper Publishers Association
The News Guild
Local Independent Online News
National Association of Hispanic Publications
National Federation of Community Broadcasters
Association of Alternative Newsmedia
Report for America / The GroundTruth Project
American Journalism Project
Lenfest Institute
Solutions Journalism Network
Local News Consortium
PEN America
Public Knowledge

Rebuild Local News is an initiative of The GroundTruth Project.