"We need to save our community newspapers and the investigative journalism they provide," Sen. Ben Cardin, D-Md., told a subcommittee of the Senate's Commerce Committee.
Layoffs, closings and cutbacks have turned the nation's newspapers into an "endangered species" as readers and advertisers rush to Web sites, said Sen. John Kerry, D-Mass., the subcommittee chairman.
Under a bill proposed by Cardin, newspapers turning to nonprofit status would no longer be able to make political endorsements but could report on all issues including political campaigns. Advertising and subscription revenue would be tax-exempt and contributions to support coverage could be tax deductible.
The proposal would allow papers to operate under the same Internal Revenue Service status that is utilized by churches, hospitals, educational institutions, public broadcasting and other nonprofit institutions, said Cardin.
Cardin has said that his aim is to preserve local papers, not large newspaper conglomerates. And he said his bill does not constitute a government bailout for papers.
Former Washington Post managing editor Steve Coll said he supports Cardin's proposal, but he does not think many papers would be able to change to nonprofit status.
"This approach is certainly no panacea," Coll said in written testimony submitted to the panel. "Even in the best case, very few of them can be expected to make this transition to nonprofit strategies."
Arianna Huffington, editor in chief of The Huffington Post, a Web site of opinion and news, said that despite all the hand-wringing about the decline of the newspaper industry, these are good times for news consumers.
Huffington said the future of journalism is not dependent on the future of newspapers.
"No, the future is to be found elsewhere," she said. "It is a linked economy. It is search engines. It is online advertising. It is citizen journalism and foundation-supported investigative funds. That's where the future is."
Kerry said steps must be taken so that news media can stay diverse and independent, but he wasn't sure what role government should play in those steps.
"As a means of conveying news in a timely way, paper and ink are less in vogue, eclipsed by the power, efficiency and technological elegance of the Internet," Kerry said as he opened the hearing. "But just looking at the erosion of newspapers is not the full picture; it's just one casualty of a completely shifting and churning information landscape."
Kerry said he was concerned that traditional journalistic standards on fairness and accuracy could suffer as newspapers falter.
"Will the emerging news media be more fragmented by interests, financial interests and other interests, and political partisanship?" he asked. "There also is the important question of whether online journalism will sustain the values of professional journalism, the way the newspaper industry has."
The Boston Globe in Kerry's home state is the latest major paper facing the threat of closure unless it can cut costs. The Globe and its largest employees union reached a tentative deal early Wednesday on concessions that union officials hope will keep the 137-year-old newspaper publishing.
Already this year, E.W. Scripps Co. closed the Rocky Mountain News in Denver, and Hearst Corp. stopped printing the Seattle Post-Intelligencer, making it online only. The Christian Science Monitor stopped daily publication in favor of a weekly print edition with online news.
Other major newspaper companies, including the owner of the Chicago Tribune and Los Angeles Times, have filed for bankruptcy protection.