Here’s how the new structure is supposed to work:
- In simple terms, Philadelphia Media Network was donated to the Institute for Journalism in New Media, which is a subsidiary of the Philadelphia Foundation, the venerable nonprofit that holds $370 million in assets.
- In actuality, the transaction is more complex.
- In December, talks between PMN owner H.F. “Gerry” Lenfest and the foundation culminated in the creation of the institute.
- PMN was then converted from a limited liability company to what is known as a “public benefit corporation.” While that specific type of corporation still operates as a for-profit, it differs from a traditional corporation because it can also engage in activities that further a public benefit.
- As a PBC, Philadelphia Media Network still must pay its own bills. But its directors can consider additional goals, with a main offered “benefit” being the value to society of an active news organization in the Philadelphia region.
- Lenfest then donated PMN — and all of its marketable assets — to the institute. Basically, the Philadelphia Foundation’s special-asset fund owns the institute, and the institute owns PMN.
- The institute could have sought to become a separate nonprofit corporation, though that would have required a long application process. By coming under the umbrella of the Philadelphia Foundation, the institute enjoys the benefits of being a tax-exempt organization without the need for lengthy IRS approval proceedings. It can start work immediately.
- The institute’s tax-exempt status, and PMN’s standing as a public benefit corporation, can help promote charitable giving to the institute. That, in turn, can support public-interest reporting at The Inquirer, the Daily News, and Philly.com.
- A PMN charitable trust, which has the same board members as PMN, was created to hold the one voting share of company stock, so as to vest control of the company in its board and ensure its editorial independence.
- If PMN makes a profit, its directors must then decide what to do with the money. They can use it to fund the journalistic enterprise, or give part or all of it to the institute.
— Jeff Gammage