Canadian organizations that raise private donations for pubcasters in Vermont and upstate New York are fighting a shift in tax policy that threatens the financial support they deliver to stations across the border.
The Canada Revenue Agency, that country’s equivalent of the Internal Revenue Service, determined that friends groups associated with Vermont Public Television and Mountain Lake PBS in Plattsburgh, N.Y., don’t fit its criteria for registered charities because they don’t deliver an educational service. If its rulings aren’t reversed on appeal, donations from Canadian viewers would no longer qualify as tax-deductible charitable contributions.
CRA revoked the charitable status of the Public Television Association of Quebec, which assists VPT, four years ago. The decision was upheld in CRA’s internal appeals process, and a further appeal is pending before the Canadian Federal Court of Appeals. A hearing in the case is slated for spring.
Canadian Friends of WCFE, a major source of membership revenue for Mountain Lake PBS, was disqualified as a registered charity in September 2012. Its appeal is still moving through the CRA’s internal process.
Both organizations continue to operate as registered charities — collecting tax-deductible donations in Canadian dollars for their sister pubcasting outlets in the U.S. — while their appeals are pending. But their cases could have far-reaching implications for pubcasters across the U.S. border.
Sudden shift unexplained
To qualify as a registered charity in Canada, a nonprofit organization must meet one of four criteria: serve the public good, provide an educational service, fulfill a religious purpose or operate to relieve poverty.
The CRA hasn’t laid out its rationale for deciding that U.S.-based public broadcasters don’t provide an educational service, and that determination is at the heart of the appeals process.
PTAQ, for example, has collected financial donations for VPT for since 1990, according to John King, VPT president. “Through the last 24 years, we’ve been regularly audited, and there has never been an issue raised,” he said.
“The fundamental question here is, ‘Is educational broadcasting charitable?’” said Troy McEachren, a Canadian attorney at Heenan Blaikie, the firm representing both friends organizations in their appeals. “There is no policy or case law in Canada about whether it is. We see this as a great opportunity to present to a court that it is.”
A CRA spokesperson declined to comment on the appeals, citing confidentiality provisions of the country's Income Tax Act.
Canadian friends organizations provide financial support to at least three additional pubcasting stations. Pacific Coast Public Television benefits KCTS in Seattle; Prairie Public Television assists North Dakota’s Prairie Public Broadcasting; and the Central Canadian Public Television Association supports Western New York Public Broadcasting Association, licensee of WNED-TV/FM and WBFO-FM in Buffalo, N.Y.
Both stations participate in the PTV Border Consortium, a loosely organized group of pubcasters that broadcast into Canada and generate substantial membership revenues from viewers north of the border.
If the CRA’s determination is upheld in the appeals process, King expects that the agency will move to revoke the charitable status of friends groups supporting U.S. pubcasters.
According to tax records from 2012, fundraising by Canadian friends groups generated about $600,000 for both VPT and Mountain Lake PBS. The Plattsburgh station originates from a small college town that is included in the Burlington, Vt., media market; like VPT, it broadcasts into Montreal and southern Quebec.
Further west, Buffalo's WNED broadcasts into Toronto and received more than $430,000 from Canadian donors in fiscal 2012.
“We are educational”
VPT draws a big chunk of its total audience from Canada, and the 7,500 donors who support the station through PTAQ make up one-quarter of its membership, King said. That’s down from a peak in the 1990s, when about half of VPT members hailed from the Great White North.
PTAQ is governed by a board comprising Canadian supporters and King. In taking up the appeal, its directors resolved to preserve a role for Canadians backing VPT.
“Generally, the PTAQ board feels it is important to the members in Canada to have a charitable organization there to support public television,” King said. “That’s why they chose to carry on this appeal.”
The Canadian Federal Court of Appeals will hear PTAQ’s appeal this spring and could reach a decision by fall, according to McEachren. If the decision goes against PTAQ, the friends group could take its final appeal to the Supreme Court of Canada.
Broadcasting to a largely rural service area in the U.S., Mountain Lake PBS relies even more on its Canadian audience. The station has a potential U.S. viewership of less than 400,000, according to President Alice Recore. Its reach into Canada via broadcast and cable systems boosts that potential audience to 3 million. Canadian donors make up about 60 percent of Mountain Lake’s membership, she said.
The station intends to appeal the CRA’s revocation decision for as long as needed, Recore said.
“The Canadian Friends of WCFE feels very strongly that this is just not right,” she said. “We are an educational organization; that’s what we pride ourselves on being. We’re really adamant about the fact our mission is education.”
Service to Canadians could suffer
PTAQ’s upcoming appeal to the Canadian courts is of immense interest to other border stations, according to Mark Vogelzang, president of Maine Public Broadcasting Network.
The CRA’s policy shift has also affected MPBN. The network established its own Canadian friends group, the Eastern Canada Educational Broadcasting Association, which applied in 2010 for registered-charity status with the CRA. The agency denied the ECEBA’s application in September 2012.
The friends group is operating as a nonprofit organization, but without the CRA’s recognition as a registered charity, its donors can’t take tax write-offs for their contributions.
“We are working hard to grow our audience there and want to give a tax benefit to donors who want to support us,” Vogelzang said. “And this has made it difficult to do that.”
Another pubcaster that relies heavily on its Canadian audience has taken steps to preserve its registered-charity status by airing as much Canadian-produced programming as possible. WNED in Buffalo also serves Canadian educators by producing French- and English-language classroom material to Canadian curriculum standards.
The Central Canadian Public Television Association has been fundraising on behalf of the Buffalo stations since 2001, and Canadian audiences account for about 68 percent of the membership revenue generated annually by the stations, according to Don Boswell, president.
WNED-TV is especially focused on creating content tailored to Canadian viewers, Boswell said. It buys rights to Canadian-produced programs and hires Canadian crews to work on its own productions.
“We don’t take lightly our association with the Canadian audience,” Boswell said. “There is an emphasis on our end to make sure we give back to the community there.”
As an added benefit, Boswell said, the Canadian-oriented content plays well on both sides of the border.
“It is an important marketplace for us, and there is a wealth of programming there that we find not only does well in Canada but is well-received by the U.S. audience,” he said.