When Gov. Kathy Hochul and New York lawmakers tucked a $90 million, first-in-the-nation tax break into the $237 billion state budget last month, lawmakers, labor unions and news publishers hailed it as a “historic” and “groundbreaking” attempt at pushing back against years of decline that decimated local news.

But as crafted, the law largely excludes many local news outlets it purports to support — aside from for-profit print newspapers — due to a crush of last-minute negotiations in the days before the budget passed. Those led to a final version that excluded most TV broadcasters and many commercial radio stations.

Broadcasters believe the exclusion of publicly traded TV and radio companies stemmed from a “drafting error,” but others say it was an intentional omission meant to steer the tax break toward smaller, independent outlets.

Also excluded were nonprofit news outlets, which were never included in the first place — to the surprise of some leading supporters who were convinced otherwise.

Now, the state’s economic development agency will be tasked with writing regulations for the new program, which will determine, among other things, whether for-profit, digital-only outlets will be included. Meanwhile, those who pushed for the tax credit are still trying to figure out whether changes can or should be made to make the law apply to a broader array of media outlets that people rely on for local news.

“We missed something all along here, and it was never quite set up the way any of us thought it was,” said Steven Waldman, founder and president of Rebuild Local News, an organization advocating for a similar credit on the federal level and for nonprofits to be included in the state credit.

A last-minute scramble

The idea behind a tax credit for news outlets has been kicking around in Albany since late 2021, when state Sen. Brad Hoylman-Sigal of Manhattan and Albany-area state Assemblymember Carrie Woerner, both Democrats, first introduced a version of it.

But the tax break that ultimately made it into law was shaped in just a few days leading up to April 20, when lawmakers gave final approval to the state budget.

Diane Kennedy, president of the New York News Publishers Association, which represents newspapers across the state, said the measure for several days ping-ponged in and out of what became the final budget deal, as Hochul and legislative leaders tried to find language that satisfied them. The association lobbied extensively for the tax credit alongside the Empire State Local News Coalition, a broad group of mostly smaller newspapers.

“Several times we thought it was [in the budget],” Kennedy said. “And then it wasn’t, and then it was again, and then it wasn’t, and then it was, and then it wasn’t, and then it was.”

The credit, which is set to expire in three years, allows media companies to reduce their tax liability to the state. It’s worth 50% of a worker’s salary, up to $50,000 per worker. An extra $5,000-per-worker credit is available for outlets that grow their workforce, up to $20,000 total.

All told, the credit is capped at $320,000 per eligible New York-based news outlet — a not-insignificant amount for small-to-mid-sized outlets whose revenue models have been obliterated in the digital era. It’s also refundable, meaning the state will cut a check to news outlets for the difference if the amount of the credit exceeds their tax bill.

Up to $30 million annually is available to qualifying news organizations for the next three years.

Who’s eligible?

The last-minute, back-and-forth negotiations left news outlets scrambling to figure out whether they qualify for the tax credit.

As the law is written, almost all for-profit print newspapers are eligible. That’s provided they’re not owned by a publicly traded company — unless they can prove their circulation or workforce dropped by 25% over the past five years, as most newspapers can.

The caveat would seem to mean newspapers owned by national newspaper conglomerates are eligible, including Gannett, which owns The Journal News and several other papers across the state, and Lee Enterprises, which owns the Buffalo News and two other, smaller New York papers.

But many TV and radio broadcasters in the state are out of luck. In the runup to the budget, Hochul and lawmakers inserted a clause prohibiting publicly owned companies from claiming the credit. Although they included the caveat for struggling newspapers with declining circulation, there was no such carveout for broadcasters.

That means the credit excludes the vast majority of New York TV stations, such as all the major network stations in New York City, and many commercial radio stations.

David Donovan, president of the Broadcasters Association, called the tax credit a “huge step in the right direction” that will “ensure that communities across New York state are able to maintain access to news and information.” But he said he believes most broadcasters were excluded from the tax credit because of a “drafting error,” literally “three or four words that were put on a line that actually belong on the line below it.”

“It is our understanding that, and I believe that, these changes are in the process of being addressed,” Donovan said. “It is our belief that all broadcasters will be eligible.”

Still, it’s unclear whether it was actually a mistake. Woerner, the measure’s original sponsor in the state Assembly, said the intent was to focus on local organizations. “The focus on local was what was really important,” she said.

Jake Ascher, a spokesperson for Hoylman-Sigal, said lawmakers and the governor’s office intentionally agreed to include language excluding publicly traded companies “to focus on independently owned” news organizations — and that’s what made it into the final agreement.

A spokesperson for Hochul didn’t respond directly when asked whether publicly traded broadcasters were intentionally excluded, or if the governor’s office is working on a legislative fix.

“Administration staff regularly meet with stakeholders representing a wide range of viewpoints on critical issues facing New York,” spokesperson John Lindsay said in a statement.

A payroll tax mix-up

Nonprofit media companies, including Gothamist and WNYC owner New York Public Radio, are excluded from the tax credit for a different reason.

Since the first version of the tax break was introduced in late 2021, the measure’s sponsors and supporters billed it as a payroll tax credit, even after it passed. That led supporters to believe nonprofit media was included, since nonprofit employers pay payroll taxes, such as unemployment insurance and the MTA commuter tax.

But the proposal was never actually a payroll tax credit. While early versions of the bill contained the words “payroll tax credit,” the nuts and bolts of the legislation always ensured it was an income tax credit or corporate franchise tax credit. The final version of the tax credit included that same nuts-and-bolts language and dropped the payroll tax misnomer entirely.

As nonprofits don’t pay income or corporate franchise taxes, they’re ineligible for the credit, according to Empire State Development, the state entity tasked with crafting regulations for the program.

That came as a shock to advocates like Waldman. In an email, he wrote that the New York tax credit is “an enormous, positive breakthrough — a significant sum of money dedicated to help local news in the state.” But if nonprofits are excluded, he said, that’s a “really unfortunate element.”

“Nonprofits — including both websites, news services and local public radio — are crucially important parts of the local news ecosystem,” Waldman wrote. “We will definitely work to get them included in future revisions.”

Kennedy, whose organization mostly represents for-profit print newspapers, said the nonprofit exclusion caught her by surprise. She said newspapers did not advocate to exclude nonprofits.

“There appears to have been limiting language in the bill from the start that didn’t get attention, but it’s certainly inadvertent that not-for-profit outlets were excluded,” she said. “That certainly wasn’t the intention.”

The law doesn’t try to police the viewpoints of eligible media outlets, leaving open the possibility that extreme right or left media companies could try to claim the credit. But the law allows the state’s economic development agency to “list certain types of establishments as ineligible” — a broad phrasing that gives the agency a huge amount of leeway as it crafts regulations in the coming months.

The law was designed with First Amendment concerns in mind, according to Hoylman-Sigal. “I take an agnostic approach,” he said. “I think any local journalism is good news for our communities, no matter what the editorial slant is of the publication.”

Kristin Devoe, a spokesperson for Empire State Development, said it’s too soon to put a timeframe on how long it will take the entity to release its regulations for the tax credit. Once its proposed rules are released, they will be subject to a public comment period.