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.