IRS Complaint Filed against Poynter Institute over Violations of Its 501c3 Status

 

 

By Jim Bleyer

A complaint challenging the Poynter Instiute for Media Studies status as a non-profit has been received by the Internal Revenue Service.

If the IRS finds that Poynter misappropriated or co-mingled funds, violated its mission statement, failed to adhere to the wishes of its founder Nelson Poynter or participated in political activity, the Institute would be on the hook for back taxes and penalties. In addition, its status as a 501(c)(3) charitable organization would be revoked.

At present, the source of the complaint desires anonymity.

Clearly, the actions of the Institute and the Tampa Bay Times, owned by the Poynter Institute, during the past year to prop up the failing newspaper by accepting loans totaling up to $15 million from billionaires and semi-billionaires with a political agenda, belies anything the idealistic, progressive founder envisioned.

In addition, The Poynter Institute land and buildings were pledged as collateral for another $20 million loan to keep the Times afloat.  Instead of putting the non-profit at risk, Poynter had the option to jettison the (hardly) “for profit” Times operation which is not central to the Institute’s mission.

There is no question that the Poynter Institute has violated its mission statement and taken actions diametrically opposed to what its founder wanted. The mission statement:

The Poynter Institute is a school dedicated to teaching and inspiring journalists and media leaders. It promotes excellence and integrity in the practice of craft and in the practical leadership of successful businesses. It stands for a journalism that informs citizens and enlightens public discourse. It carries forward Nelson Poynter’s belief in the value of independent journalism.

And there is this from Poynter’s own website:

“(Nelson) Poynter willed the controlling stock of the Times Publishing Company to the Institute to assure its continued independence after his death, and to commit the publishing company’s dividends to elevate the standards of journalism through training and research.”

The newspaper is no longer “independent,” as evidenced by its coverage since a Republican-oriented business group “invested”  $12-15 million in the Times several months ago.  Its editorial positions have pivoted 180 degrees from the longtime progressive stance Nelson Poynter espoused more than five decades ago.

Poynter-Times cannot justify risking the non-profit’s assets, accepting personal loans from people whose political and social philosophy is at odds with Nelson Poynter, and promoting biased reporting to satisfy its right-wing investors.

Besides the loan from the GOP cabal, the Times refinancing includes a $20 million secured credit facility, including a revolving line of credit and two terms loans, Encina Business Credit LLC, a  Chicago-based asset lender.

If the loan cannot be repaid—and there is no reason to believe the Times will suddenly become sufficiently profitable to pay back the loans—Encina, a creditor with no interest in the Poynter Institute’s mission—will own the building and property where the mission needs to be fulfilled.

According to the American Bar Association’s “Business Law Today,”  if a for profit subsidiary’s activities are not related to the parent’s charitable purposes, “investment in the new entity should be a reasonable use of the organization’s resources and may need to satisfy a ‘prudent investment’ standard.”

The secured loans only guarantee that publisher Paul Tash’s exorbitant salary will continue for a time as well as pension obligations,  the “investors” will obtain 100 percent favorable news coverage in the Times, and that a right-wing political philosophy overwhelmingly will prevail in the paper’s news and editorial pages.

There is more fodder for IRS scrutiny.  Tash is chairman of the Poynter Board of Trustees, the group that approved collateralizing the Institute’s assets to ensure continuation of his $500,000+ a year salary to manage the struggling Times.

A prime example of The Times slanting its coverage to jibe with the philosophy of the new investors is the St. Petersburg mayoralty race. From the campaign’s outset, the Times has more than endorsed Republican Rick Baker, an avid Trumpite, over incumbent Democrat Rick Kriseman; it has made Baker’s election its mission with editorial carpet bombing, the publishing of falsehoods and half truths, and strikingly biased coverage in what are purported to be news pages. Tash obviously feels compelled to deliver a Baker victory in his first test after accepting the bailout.

Just as embarrassingly, the Times endorsed Justin Bean in a St. Petersburg city council race. Bean possessed the thinnest resumé of the eight candidates and a lengthy arrest record but he’s a registered Republican who attended Donald Trump’s inauguration.

On June 30, Tash announced that three high-profile Republicans in addition to himself loaned the red ink-stained Times $1.5 million apiece.  He referred to them as “investors.”

The use of the term “investors” suggests Times stock might have been transferred or pledged as collateral, a move that, if true, Nelson Poynter would have unquestionably opposed.

Tash would not reveal four other investors but it was later disclosed by Patrick Manteiga, editor and publisher of La Gaceta, that two of them are former hedge fund manager and Tampa Bay Lightning owner Jeffrey Vinik and entrepreneur/philanthropist Kiran Patel.

Those that Tash originally identified were other notable GOP donors: businessman and philanthropist Frank Morsani, commercial real estate developer Ted Couch, CEO of Black Diamond Investment Group Robert Rothman, Tash and his wife.  At least two and as many as four additional Times investors remain anonymous. Every one of the benefactors that has been identified– has donated liberally to Republicans including Trump, Mitt Romney, George W. Bush, Rick Scott, Paul Ryan, and Jeb Bush.

The collateralized Poynter Institute property

The Times has been in dire financial straits for years and its situation has only worsened.  It sold its office building in downtown St. Petersburg for $19 million and ended a naming rights deal on the Tampa Bay Lightning arena in downtown Tampa.  The naming arrangement may have involved more than cash; the Times has never published the whole truth about Vinik.

Then there was the purchase in 2016 of the Tampa Tribune from the private equity firm that more than doubled its investment by selling off the Trib land and building a year prior.  By incurring more debt on an entity that was essentially worthless, the Times fell deeper into the economic abyss.  No one was bidding against the Times for a carcass.

Directed Capital of St. Petersburg who packaged the GOP loan describes itself as “a national distressed asset workout specialist firm that opportunistically acquires, manages and repositions distressed commercial mortgage loans in the $1 million to $15 million range.”

So the economically squeezed Poynter Institute has prostituted itself to those who buoy its bottom line regardless of their total lack of progressive credentials.  The liberal foundations promoting the public interest that have been donating millions to Poynter have not taken kindly to recent developments.

The IRS considers complaints from the general public, members of Congress, federal and state government agencies, and internal sources.

These complaints regarding the non-adherence to federal tax laws by entities claiming non-profit status are known as “referrals.” This is described as any communication alleging a tax-exempt organization is in potential noncompliance with the tax law. Usually the complaint is detailed on Form 13909, known as a Tax-Exempt Organization Complaint

Referrals are sent to analysts at the Exempt Organizations Classifications Office in Dallas, TX. The IRS will send an acknowledgement letter to all non-IRS sources making a referral, unless it was made anonymously.

The IRS cannot disclose whether it has initiated an examination or the results of an examination. In fact, the source of a referral only receives an acknowledgement letter.

Classification experts confirm the identity of the referred organization. A revenue agent then performs a thorough technical analysis of the allegation and can take one of four steps:

• The information does not warrant further action. The agent inputs information, including rationale, into the “referral database” and closes the referral.

• The referral relates to activities that should be considered at a future date. The agent documents the database and schedules the appropriate date to re-evaluate the information.

• The referral contains characteristics that require it to be forwarded to a committee of career EO managers and agents. The committee evaluates referrals and decides whether to proceed with an examination.

• The information warrants an examination of the organization. The agent documents the reasons for his decision in the database and the information becomes part of the examination file.

When the IRS decides to examine an organization, the Classification Office will forward the case to a field group for assignment to a revenue agent. The agent will contact the organization and schedule an appointment to begin the examination.

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