IRS Looking at Google/Mozilla Relationship

ric482 writes "With the release of the Mozilla Foundation's 2007 financial report, questions have been raised by the IRS, who are due to perform an audit on the non-profit organization behind the massively popular Firefox browser. Last year, the Foundation received $66 million of its total $75 million revenue (88 percent) from search engine maestros Google, so the IRS are looking for blood over the organization's tax exempt status. Back in 2006, Mozilla got $59.5 million from Google — around 85 percent of the organization's revenue. Google and Mozilla are part of a 'you scratch my back, I'll pay your bills' sort of agreement, with the Google search bar firmly placed in the toolbar, and on the default homepage. Things were a bit rocky a couple of months back when Google unveiled the Beta-run of its Chrome browser, but Mozilla and Google hugged it out and sealed a deal that will last for another three years. That deal will expire in November 2011."

Comments

Re:What makes Mozilla different?

[morgan_greywolf]

Actually, having done bookkeeping for a 501(c)3 on a voluntary basis, I can say that there really aren't that many differences. Basically, a 501(c)3 is required to followed GAP accounting methods -- just as any other IRS-recognized corporation. They have to donate a certain minimum percentage of their annual income to charity. And they have to show that they are organized for the purposes which a 501(c)3 may be organized. Since a 501(c)3 is basically a 'miscellaneous charity status' with the IRS, this means pretty much anything that benefits the community or the greater good, except politics -- they can't directly or indirectly support a particular candidate or ballot initiative. (How non-profits often get around this is by saying "We don't endorse a particular candidate, but many of our members say they are voting for X." )

The important thing that IRS will be looking for is this: Is Mozilla money co-mingling with Google money? Are they keeping it separate? DOes it look like Mozilla is just a front for Google? And so forth. They'll do that by auditing the books, piling through receipts and conducting interviews with appropriate personnel. Mozilla as a non-profit can, believe it or not, sell almost anything. Selling things is not at all illegal for non-profit and actually 'making a profit' is not illegal -- the profit just has to go into a specific fund set aside for purposes that Mozilla is organized for. Such as, in this case, funding Firefox and Thunderbird development.

Basically

[Anonymous Coward]

Wow, that's a pretty slanted writeup by ric482...

Back in 2005, before the Mozilla Corporation was created as a for-profit organization, the deal with Google went through the Mozilla Foundation. There was worry that the income derived then would need to be reviewed by the IRS (a large part of the reason the Mozilla Corporation was created in the first place). Mozilla set aside a large part of that income in case that happened and the IRS would end up disagreeing with the status of that income.

The review of that income is basically happening now (and the IRS is probably also looking at what happened since).

Mitchell says it like this:

In 2005 the Mozilla Foundation established a "tax reserve fund" for a portion of the revenue the Foundation received that year from Google. We did this in case the IRS (the "Internal Revenue Service," the US national tax agency) decided to review the tax status of these funds. This turns out to have been beneficial, as the IRS has decided to review this issue and the Mozilla Foundation. We are early in the process and do not yet have a good feel for how long this will take or the overall scope of what will be involved.

(Lots of other interesting information in that blog entry, too.)