Fox Matters to Media Matters and Media Matters Matters to C. Boyden Gray

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August 5, 2011; Source: Politico | In June, the NPQ Newswire covered the attempt of Fox News to gin up a “citizens'” campaign to convince the IRS to pull the 501(c)(3) status of Media Matters, including regular ol’ viewers to opine that MM had violated its public charity tax status.   But it wasn’t going to do anything itself, no sirree bob!  Now, former White House counsel under George W. Bush, C. Boyden Gray, has written a complaint asking the IRS to revoke MM’s tax-exempt status because, he alleges, “Media Matters’s stated strategy makes clear that it attacks Fox News because Media Matters believes it to be a proxy for the Republican Party; and, furthermore, Media Matters often foregoes the proxy altogether and simply attacks the Republican Party directly.” That therefore makes MM a politically partisan organization that does not warrant a 501(c)(3) tag.  Gray also contends that MM is engaged, in the words of MM founder, David Brock, in a “war on Fox,” dedicating itself to an attack on the commercial interests of a particular corporate entity (News Corp.) and its CEO (Rupert Murdoch), which also shifts MM’s activities out of the realm of tax exempt “educational”. 

The IRS just about never comments on a petition like Gray’s, even whether it is considering it, so if and until there is a decision, the IRS is unlikely to say anything.  But commentators are weighing in.  Fox itself has presented an analysis of the case law that it believes puts MM on the wrong side of tax exempt law.  Although it notes Marc Owens, a former IRS tax exempt official, defending Media Matters, Fox presents its own legal analysis of MM’s vulnerability.  We suspect that despite Brock’s propensity for grandiose overstatement (remember Brock’s history as a conservative who viciously attacked Anita Hill with stories he admitted were false, prior to turning coat on the Republicans with the publication of his mea culpa, Blinded by the Right), MM’s tax exempt status will be protected from C. Boyden Gray and Rupert Murdoch under freedom of speech guarantees.  Fox will run with this for a while until the kerfluffle fades.

But Fox’s analysis contains two really interesting tidbits of potential interest to NPQ Newswire readers:

  • In one section, it mentions a 1920 opinion of the IRS Solicitor “for nonprofits, the ‘prime purpose of education is to benefit the individual,’ including the ‘fair and balanced’ dissemination of information.”  So that’s the origin of Fox’s tagline!
  • In another, the Fox analyst says, “Because it is a nonprofit, the U.S. government is also effectively supporting the website’s attempt to disrupt News Corp’s purchase of BSkyB, a satellite broadcaster; its demands to Congress to investigate News Corp. and its head, Rupert Murdoch; its efforts to get disgruntled ex-employees to file suit against FOX News; and its pressuring investors to divest their holdings in the company.” (emphasis added). In other words, Fox adopts a position that is completely anathema to conservative foundations, that the tax exemption makes nonprofits (including nonprofit foundations, presumably) at least quasi-public and subject to the kind of regulation and oversight that conservatives abhor.

A legal kerfluffle at best, even with Gray and Owens doing battle, but there will be entertainment value nonetheless.—Rick Cohen