Posted on February 25, 2012

Nonprofit Chicago News Site to Close

The Chicago News Cooperative, a nonprofit news site launched in the fall of 2009, is suspending its contributions to the New York Times and will stop updating is Web site as of February 26, the Chicago Reader reports.

Launched with significant support from the Chicago-based John D. and Catherine T. MacArthur Foundation, with local PBS station WTTW acting as its fiscal sponsor, CNC saw its funding dry up after the Internal Revenue Service issued a ruling that compromised the level of corporate underwriting and foundation support CNC can receive. According to the Reader, general counsel advised the foundation that until the IRS ruled on whether CNC qualified as a tax-exempt nonprofit, MacArthur grants should be earmarked for specific programs rather than simply to sustain the organization.

CNC editor James O'Shea told the Reader the decision leaves CNC in the position of asking foundations for program-related investments, low-interest loans that must be paid back. "But the reporting requirements are onerous, the totals are usually far smaller, and the penalties severe — foundation executives can be personally fined."

While a handful of nonprofit news sites, including ProPublica, have been able to raise enough money to survive, CNC, which focused on local news, had little success in that area. "CNC always has been an experiment in trying to figure out a way to finance accountability journalism, the kind of reporting that many news organizations are abandoning as they struggle with a deteriorating business model and financial problems," O'Shea wrote in an editorial on the CNC site. "This is a very difficult problem especially in major cities and carries ominous implications for a democracy. An organization dedicated to public service journalism is an indispensible civic asset, and we remain committed to finding some possible answers."