What's the Right Way to Accept Donations?

Schapht asks: "Not long ago, SourceForge.net started offering users and projects the ability to accept donations. But there doesn't seem to be much information on the legal implications of accepting donations. Should open source projects start registering themselves as businesses? Would there be fines if they didn't? Are there any options for a project that can't afford the processing fees involved in registering a business?"

Comments

My Method

[students]

I use a standard paypal account. No fees. If donations are small, you don't have to report them to the IRS. As I understand it, the donator may even claim a tax deduction even though you aren't a 501C3 nonprofit. Check out the donate button.

Hrmmm..,. lemmie see.....

[BrynM]

INAL and all of that. From some creative googling I found that you might try looking for "charitable organization law site:irs.gov" and "private foundation law site:irs.gov". If you need to know your state laws, try the same searches with "site:(whateverState).gov". For example, mine would be "site:.ca.gov".

Heres some Goodies:
(many are PDFs)

• PUBLIC CHARITY CLASSIFICATION AND PRIVATE FOUNDATION ISSUES:
• DOMESTIC ORGANIZATIONS WITH FOREIGN OPERATIONS
• LIMITED LIABILITY COMPANIES AS EXEMPT ORGANIZATIONS

Be sure to check out the real deal, 501(c)(3) - but its a bugger of a read! Right here is a spot I think you might land in if you worked hard enough. I'm sure an OSS project could qualify as furthering science, but that might be a fight. It may be easier to jump through the hoops of a private foundation status. Rather than try to find what you qualify for in it, I would concentrate on what would disqualify you. It might be a more manageable list. ;)

The law should really be amended to keep up with this, IMHO. We have many other laws that were to "catch up with the times". Why not one to recognize collaborative efforts of this nature?

Re:Profit / Loss

[NutscrapeSucks]

If you were to consider it a business, could you deduct a fair hourly wage as loss?

No. You will be smacked down hard. (Think about it: nobody would pay any taxes if you could get away with this, because they would pay themselves to watch TV.)

However, You can structure your OSS Hobby as a business, and that allows you to write off all your computer equipment. DSL line, hosting, etc. This will last for a few years until the IRS shuts you down for being unprofitable. This works even better if you are actually a contract programmer.

If you're planning to do this, get an tax accountant. As mine says "Make your life a business."