By James C. Sherlock

The author has just finished reading a news story by Markus Schmidt, the prolific journalist who writes for the Virginian-Pilot. This was a reprinting of an article that Mr. Schmidt had written for the Virginia Mercury, his employer. It is his right to support the Virginia Democrats. Examples abound:

Virginia AG Jones joins the 21 attorneys general in condemning DOJ’s pressure on Minnesota. January 29, 2026 at 11:31 AM

Coalition warns Trump Administration’s demands for resident data, policy changes and state sovereignty.

‘Not in the right place:’ Hanover residents and supervisors oppose DHS ICE facility

January 29, 2026 at 5:28 AM

Board cites land use conflicts and lack consultation regarding detention proposal.

Democrats in Virginia push for restrictions on federal immigration enforcement

January 28, 2026 at 12:52 pm

A package of bills that would limit collaboration, protect sensitive areas and give Democrats control over state government.

Schmidt considers it his duty to write these articles. The Virginia Mercury and Virginian-Pilot have the right to publish these articles.

The reader should be aware of the source of any news they receive on their doorstep. We’ll look.

States Newsroom

Virginia Mercury articles are now appearing in newspapers Virginians regard as local. States Newsroom is the owner.

The largest nonprofit state-focused news organization in the United States, reporting from all capitals.

States Newsroom, with its headquarters in Washington, D.C., began in 2018 thanks to funding provided by the Hopewell Foundation, managed at the time by Arabella Advisors, a private consulting firm.

Influence Watch

Arabella Advisors (also known as “Arabella” or “Arabella Network”) is a leftist philanthropic consultancy that offers strategy, advocacy, impact investment, and management services for high-dollar foundations and nonprofits. Eric Kessler founded the company in 2005. He was a Clinton Administration alumnus, and a long-time employee at the League of Conservation Voters (LCV) and National Democratic Institute. The Atlantic has described it as the “mothership of a massive progressive dark-money organization” as well as a Washington consulting company […] which has funneled millions of dollars to groups that support Democrats and progressive causes.

Pop-up groups from Arabella have addressed a variety of political issues including abortion, net neutrality and health care policies, Supreme Court confirmations for the 2020 Census, as well as environmental regulations, election laws, tax policy and electoral redistricting. Many Arabella groups have “spun-off” and become independent organizations.

Arabella spun off States Newsroom, which was perhaps its most successful political venture. It is now the dominant local newspaper in the United States, despite the rapid decline of local and regional journalism.

A 501(c3)

States Newsroom was reorganized into a 501(c). Arabella made that choice and it could prove problematic. States Newsroom has a clear agenda to influence elections.

States Newsroom’s IRS Form 990 for 2024 shows that the organization received contributions of just over $27,000,000. It received $17 Million in 2023. This was not an election year for the federal government. In 2022 it received $23,316.863.

According to federal and state law, no one can “own” a 501 (c) (3). After all, it is a public charity by definition. This one is controlled by a few individuals. They adjust their contributions so that they spike during election years.

The Schedule B (Form 910), Schedule of Contributors for 2024, revealed that one person had contributed $12,549 118 in cash out of the $27 million total received. A second person contributed $9.700,000. The names of the donors were not included. While their website prominently displays names of donors who have given more than $1,000 it does not specify which two individuals have contributed more than 80%.

Schedule B for 2023 showed two individual contributions of $9.990,000.00 and $3.449.181.01. So, $13.5 million of the $17 million raised is roughly equal to 80%.

Many 501(c3)(3) organizations have donors as their primary source. This is not a problem.

However, to maintain their tax exempt status, 501(c),(3) organizations are subjected to strict restrictions regarding political activities. States Newsroom might have gone too far.

The IRS Prohibition of Political Campaign Intervention

According to the Internal Revenue Code (IRC), it is a violation of federal law for any section 501(c3) organization to directly or indirectly participate in or intervene in any political campaign, whether in support or opposition, on behalf or against any candidate running for an elective office. The prohibition on political campaigning is clearly violated by contributions to campaign funds and public statements (verbal or in writing) made in the name of the organization to support or oppose any candidate for office. Violation of this prohibition can result in the denial of tax exemption status or the imposition certain excise taxes.

Depending on the circumstances, certain activities or expenditures are not prohibited. Certain voter education activities, such as presenting public forums or publishing voter education guides, conducted in a nonpartisan manner are not prohibited political campaign activity. Other activities that encourage people to take part in the electoral process such as voter registration or get-out-the vote drives would also not be considered prohibited political campaign activities if they were conducted in a neutral manner.

Participation or intervention in voter education or registration that demonstrates bias (a) favors one candidate over another, (b) opposes a particular candidate, or (c), has the effect of favoring any candidate or group, is prohibited.

Bottom Line

States Newsroom can eliminate any potential 501(c),(3) issues by reconstituting themselves as a legal corporation. It’s between them, their attorneys, and the IRS.

It is important that the public knows who owns their news. It is important that we know who the two people behind States Newsroom are.

Virginia Mercury can get an exclusive by reporting on it.