There’s a rising concern in some quarters that Comic-Con International has sold out in ways that go beyond the lack of on-site registration. What once had been an educational community seems to have morphed into a PR-palooza, with the celebration of an art form giving way to corporate hype and celebutards.
For an event such as Comic-Con, complaints like this aren’t just idle chatter. San Diego Comic Convention is a tax-exempt educational charity and, as Blog@ reported last year, leading charity watchdogs have raised serious questions as to whether Comic-Con continues to deserve its 501(c)(3) status.
Does rampant marketing compromise Comic-Con’s charitable mission? A quick legal overview after the jump:
Comic-Con’s charitable purposes: To answer this question accurately, the first thing we need to know is the basis of Comic-Con’s tax-exempt status. Fortunately we don’t have to guess: Comic-Con sets forth its charitable purposes in its annual filings with the IRS, available for public review on Guidestar.org. According to the group’s latest Form 990, its primary exempt purpose is “sponsoring popular arts.” In particular, this entails sponsoring three conventions — WonderCon, APE and the San Diego Comic-Con — with the purpose of the San Diego Comic-Con described as follows:
Sponsoring of a comic convention and other events related to popular art which promotes education regarding the art and industry on an international basis and celebrates the contribution of comic books to art.
Right away we can see that Comic-Con’s charitable purpose makes a direct reference to the comic industry and comics’ impact on other art forms. This would seem to allow at least for overtly educational panels on comic book companies and films influenced by the medium. But does it allow outright self-promotion?
Tax-exemption and marketing: When some nonprofit leaders may criticize Comic-Con for being too commercial, they’re painting an over-idealized picture of how things really work in the nonprofit world. Commercial PR is actually quite common at events sponsored by tax-exempt organizations. And it is not abuse; Section 513 of the U.S. tax code exempts from taxation convention and trade-show activities by organizations whose purposes include “a show which stimulates interest in, and demand for, the products of a particular industry or which educates persons in attendance regarding new developments or products and services related to the exempt activities of the organization.”
Yep, that’s right: Under U.S. tax law, selling space to exhibitors who flog their own merchandise can be related to a comics charity’s educational purpose. A tax-exempt convention or trade show is seen as providing a forum in which people can learn about various companies without being swayed by the organizers’ pursuit of personal profit. When joined with other educational activities, product marketing arguably serves to foster a community of interest and to educate people about the current state of an industry and art form.
Comic-Con is far from the only tax-exempt group that has benefited from this policy. For instance, runway fashion shows are not exactly known for their lack of hype, yet, until it was bought out, the organization that sponsors the designer runway shows at New York Fashion Week legitimately ran them as a nonprofit project of the Council of Fashion Designers of America. Likewise, anyone who belongs to a professional association has probably been to a tax-exempt show where vendors from an array of companies promote their latest products. Probably the most familiar — and lucrative — example is the Oscars, an event that generates upwards of $70 million a year of tax-free marketing for the movie industry.
What next? While the corporate promotion at Comic-Con may be consistent with its charitable purposes as a matter of law, it’s also important to remember that perception matters: The law can change, and public reaction can turn a cultural phenomenon into yesterday’s news. Concern that a nonprofit event is getting too commercial can also prompt local government officials to demand that the organization pay taxes, fees and commercial rates from which it is otherwise exempt.
The industry’s exponential growth also increases the pressure on Comic-Con to be more conspicuously charitable. The essence of the convention has not changed. DC, Marvel and even most indy comics companies have been for-profit companies since the first San Diego con back in 1970; even as it nurtured a vibrant community, Comic-Con has always served the industry’s commercial interests. Yet as comics have grown from an outsider niche to a multi-billion-dollar marketing juggernaut, there’s a natural temptation to idealize the past.
A nonprofit in Comic-Con’s position has several options. It can defend the status quo, jettison the PR machine or work with corporate sponsors to make the marketing seem less blatantly commercial. As hectic as the convention can get, it’s when the weekend’s over that the hard work of planning begins.
July 25th, 2008 at 10:09 am
That’s a great article! I hope Comic Con can always stay true to it’s origins and actual comics and the promotion of them.
July 25th, 2008 at 11:59 am
Great article! Very interesting stuff.
July 25th, 2008 at 3:00 pm
Most genre conventions are set up as non-profit (or on occasion “not for Profit” which is slightly easier to qualify for). Worldcon would notriously have to publish their books to verify that by the time the show’s accounting ended, there was nothing in the coffers. This was usually done by making a series of donations to other conventions (assuming Worldcon made a profit that year, of course) and most often, the science fiction society that sponsored the show that year. So if, say, Philly hosted Worldcon, you’d most likely see a sizable donation to PSFS.
In SDCC’s case, the “profits” are poured into the next year’s show, so there’s no need to give the money away.
These kind of articles got written after any major event that looks terribly expensive, in an attempt to rile the public up about people “getting away with” not paying taxes. There were a few in the San Diego papers last year. And as you see, they caused the con to be declared for profit, which meant the con couldn’t be run this year.
Oh, wait…
As a rule, once the people actually make the decisions are reminded about how many people are brought to the city, and how many hotels they filled, and how much money they spent in the city, the issue is quickly forgotten.
It’s whole reason Las Vegas ans Los Angeles want to bring the con to their towns. It’s a gold mine. Heck, you remember how fast the Mayor of SD bent over backwards to apologize for last year’s remark about the American Idol auditionees being “people with real talent” as opposed to the folks at the con? He knows what would happen to the city if the con went away.
These articles are merely attempts to get one’s name in print, and to get a little attention. If people start looking at SDCC’s status, it’s only a setp away to check every charity for their status, and nobody wants that.
July 26th, 2008 at 2:56 pm
I’d like to note that while Vinnie’s general statement that most genre conventions are run as non-profit organizations is true, a number of the specific things he says are not.
1. The distinction “non-profit”/”not for profit” does not actually exist in any jurisdiction I’ve been able to find. They are two different ways of describing the same sort of legal entity. The laws are usually at the state level, and different states have different names, so one state may call them “non-profit,” another “not-for-profit,” and another (California) may call them “public benefit.” They’re all generally the same. In addition, profit-making status generally is defined at the state level in the USA, while tax status is generally defined at the federal level by the IRS, which is why you talk about “501(c)(3)” organizations, that being the status that ComicCon and many other non-profit genre conventions have.
2. The World Science Fiction Society does require the individual organizing committees (each year’s convention is run by a completely new group, legally and financially independent of its predecessor and successor) to file financial statements showing how it has spent the money it took in for that Worldcon. (Details are in Article 2 of the WSFS Constitution. However, this does not mean that a Worldcon must have spent all of its money by the end of the convention, as Vinnie implies. It can take years before a Worldcon finishes spending all of its “reportable WSFS surplus.” In addition, since 1989, most Worldcons have automatically passed forward at least half of any surplus to be split evenly among the next three Worldcon committees. (Not all Worldcons during this period have had surplus funds to pass along in this way.)
This does not invalidate the general point that most legitimate fan-run SF/F genre conventions are run as non-profit organizations, and many of them have considerable financial openness, which I consider quite admirable.