Media Matters tax-exempt status may face new scrutiny from Congress

Congressional Republicans are now interested in examining Media Matters For America‘s tax-exempt status, The Daily Caller has learned. Doing so would cause the GOP to wade into the complex world of tax laws that govern “exempt organizations” such as Media Matters and more than 1 million other charitable organizations that are exempt from federal income tax.

Media Matters’ critics have questioned its tax-exempt status for some time. The Internal Revenue Service has a series of requirements that must be met before organizations can qualify. Successful applicants pay no federal income tax because the government presumes such charities perform services that benefit the public. Donors also may deduct their charitable contributions.

One central requirement before an organization like Media Matters can achieve the gold-standard nonprofit status — known by its place in the tax code, Section 501(c)(3) — is that it may not “attempt to influence legislation as a substantial part of its activities” or “participate in any campaign activity for or against political candidates.”

But the law, and how it is implemented, is complex.

“Tax benefits to charitable organizations are three-fold: exemption from federal income tax, tax-deductible contributions and tax-exempt bonds,” said Iowa Republican Sen. Chuck Grassley.

TheDC sought comment from Grassley before becoming aware that other members of Congress were talking about examining Media Matters’ tax status. “The standards for tax exemption deserve review as a matter of good stewardship on the part of Congress,” he said, “and should be considered as part of any comprehensive tax reform.”

(INSIDE MEDIA MATTERS: Follow the investigative series here)

The Fox News Channel, a frequent Media Matters target, has aired dozens of broadcast segments on the organization and its tax-exempt status. The stories often cite comments made by Media Matters CEO David Brock, who described his organization’s efforts against the news channel as “guerilla warfare and sabotage” in a 2011 interview with Ben Smith, then a reporter with Politico.

According to C. Boyden Gray, White House Counsel under President George H.W. Bush, Media Matters’ tax-exempt status, combined with its campaign against Fox News, amounts to taxpayers subsidizing broadsides directed at the cable news channel.

“I think there’s nothing wrong, generally speaking, with anyone attacking any news outlet,” Gray told The Daily Caller. “But whether it’s okay to get a tax subsidy for it, that’s another question.”

Gray also argued that Media Matters’ political activities are unique and differentiate it from similar research organizations on the right.

“[The] Heritage [Foundation] and the Media Research Center provide material, as does Media Matters, to networks about alleged factual inaccuracies,” Gray said. “That’s completely fair game and everybody does that. But I don’t think any of these other ones target individuals or engages in what is political training.”

The political training Gray refers to is the Media Matters “Progressive Talent Initiative,” a program designed to instruct left-leaning pundits on how to effectively bring the liberal gospel to the airwaves.

Gray said trainees could easily bring these newly acquired talents to Democratic campaigns, which he believes could be problematic for the legal status of their training organization.

“It seems to be only Democrats who get the training,” he explained.