When El Paso Community Foundation's Eric Pearson submitted an application to the Knight Foundation in 2010 to relaunch Newspaper Tree, a local online news site that had gone silent after an early success during 2003-2007, he probably had no idea that in 2012 Newspaper Tree would still be waiting for IRS approval as a non-profit, even though they started the accreditation process soon after they received the Knight grant.

Pearson, who spent 19 years as a journalist, knew El Paso's tradition of multiple local newspapers and wanted to see ia new community-focused news paper develop online as a bi-lingual resource.

"El Paso has had vibrant local papers since 1886, and right now we have only one English daily newspaper, the El Paso Times, so it seems like there was room for an online edition," Pearson says.  "We wanted to do in-depth local investigative reporting and combine that with a virtual front porch, where neighbors can swap local news."

But neither Pearson nor anyone else connected with the project had any idea IRS approval would take so long. The Foundation filed for tax-exempt status in 2010 and the IRS has continually pushed back the decision date since then.  "We're really not comfortable publishing the site till we have the tax-exempt status," says Pearson. "And we keep thinking maybe we're almost there--until the IRS pushes the date back once more."

Making a commitment to publish a much-needed and much sought after local news product and then hitting two years of delays has significant frustrations. On one hand, individual donors and funders want to see something happen with the funds they have committed;  without action, they could decide to move their money elsewhere. On the other hand, Pearson and company have to be careful not to significantly spend down their funding while the project is in an IRS- induced holding pattern; their goal is to have the bulk of the funds available to use once IRS approval is in place, hopefully, any minute now.

Nevertheless, there have been a couple of false starts. Based on time estimates the IRS contacts provided, Pearson has hired--and in some cases seen the departure of--significant staffers, who often came aboard only to end up spinning their wheels because of subsequent IRS delays in making a decision on the Newspaper Tree application.  The only current Newspaper Tree staffer, publisher Anthony Martinez, who founded the site in 2003 and ran it for a year before heading to law school, is simultaneously planning out the site and building community relationships and waiting for the IRS ruling to take place so Newspaper Tree can really go live.

"There are evergreen pieces we can do, and basic content we can develop but it doesn't make sense to have paid reporters until we know the content they create will be current," says Martinez. "We can have a tremendous impact in the community but we have to get the legal status straightened out first."

Newspaper Tree is not the first news non-profit to face significant delays in IRS approval for non-profit status. In San Francisco, the SF Public Press waited 32 months for IRS sign-off on their non-profit application.  The Investigative News Network, a nonprofit consortium of investigative news sites that worked with the Public Press to help them secure IRS approval,  received their own IRS non-profit status in March 2011, 19 months after they applied.

"It could be that Newspaper Tree is a different bucket because it started life as a for-profit business--but we don't really even know how much that is a factor," said Kevin Davis, INN's Executive Director.

For Pearson and Martinez, moving ahead with Newspaper Tree has become an exercise in both hope and determination.  "It is incredibly frustrating this has gone on so long with no IRS ruling and dates getting pushed back, "says Pearson. "I have a hard time explaining it to people in the community who want a new news source--today."

Adds Martinez, "We have the vision, we have the interest and the momentum. We just need the green light from the IRS. Once we get the ruling, we can jump ahead and create the investigative, community-focused online newspaper we know El Paso needs and wants."

But, for now, both agree that it's a waiting game--and hope the IRS will honor their latest promise and make a ruling before the end of 2012.