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X.Org Foundation Loses 501(c)3 Non-Profit Status

Posted by timothy on from the swimming-in-the-fine-print dept.

An anonymous reader writes "The X.Org Foundation, which drives the X.Org Server projects, Mesa, and Wayland open-source programs, had its tax-exempt status revoked by the IRS. It turns out the X.Org Foundation had put in quite a lot of work to become a non-profit organization, with guidance from the Software Freedom Law Center. They got in trouble after failing to routinely file their taxes on time. There's also been a host of other X.Org accounting errors in recent years. There was also the recent news of the IRS going after open-source projects, too."

5 of 208 comments (clear)

  1. No one to blame but themselves by barlevg · · Score: 5, Insightful

    Seriously. How hard is it to file your taxes on time? Or to hire someone to do it for you?

    1. Re:No one to blame but themselves by jellomizer · · Score: 4, Insightful

      Exactly, I love all the woe is me, big brother is out to get me. While you fail to play by the rules set in place.

      You want Tax Exempt status, good, make sure you follow the rules to keep it.

      --
      If something is so important that you feel the need to post it on the internet... It probably isn't that important.
    2. Re:No one to blame but themselves by Americano · · Score: 4, Insightful

      Section 6033(j) of the Internal Revenue Code automatically revokes the exemption of any organization that fails to satisfy its filing requirement for three consecutive years. The automatic revocation of exemption is effective as of the due date of the third required annual filing or notice.

      ( Source )

      This isn't an "ambush." What accountant doesn't realize the importance of filing taxes on time? What accountant fails to realize this *three years in a row*? What board trusts their financial matters to an accountant who doesn't realize these things?

      This is standard procedure - they failed to file properly 3 years in a row, and so they had their tax exemption revoked. The IRS isn't "springing" anything on them. The IRS isn't "ambushing" them. The IRS is following it's standard procedure - if you want special tax exempt status, there are a few requirements you have to meet. One of these is filing your tax returns in a timely and complete manner. If you fail to do this, you will automatically be de-listed, and you'll receive a polite letter indicating that that has happened. They shouldn't be chasing after people. The agreement when you're granted tax-exempt status is that you will file properly and on time. That's your notice. Failing to do so results in revocation.

  2. Re:not worth it by bobbied · · Score: 4, Insightful

    I though text-exempt status also meant you didn't have to file all that paperwork once you had it. Lot of good it does to have tax-exempt status for a non-profit that makes no money, anyway.

    First off... Non-Profit does not mean they don't make money, only that any money and assets they acquire do not belong to someone or a for profit entity. Non-Profits can and do make money, sell things and services at a profit, pay employees and all the same things other businesses do, but they cannot acquire cash and assets which end up owned by an individual or other for profit entity.

    Second, the filing requirements for tax returns are not that involved for a 501c3. For most non-profits it amounts to filing out a form similar to a 1040Ez. The IRS generally wants to know where your money came from so they can cross reference donors deductions with receipts, at least in the general sense. I don't believe that a non-profit has to report who is giving to it, just how much they received. I also don't think that they would be required to pay taxes, only file the report.

    The real problem here is that the organization that can't be bothered to file the yearly reports is likely going to be a problem for someone wanting to give money and take the tax deduction. If the organization doesn't supply a receipt a donor will be limited to $250 and if they cannot supply the IRS with the yearly return, I'm sure they won't be bothered to send out receipts either.

    Seems that this organization doesn't really care about the money side of things. This is a shame, because the accounting is NOT that hard and the risks of not having proper controls in place is pretty big.

    --
    "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
  3. Tax exempt isn't magic by Sycraft-fu · · Score: 4, Insightful

    You don't get awarded tax exempt status and then are allowed to do as you please. If that were the case, every company ever would start out as a charity, get tax exempt status, and then change over.

    So you have to file and show that your activities still warrant tax exempt status, that you aren't violating the rules for it. For example suppose you run a non-profit and you get a massive donation, some billionaire leaves you a billion dollars. You decide cool, you'll pay all of it to yourself as salary for that year. I mean the entity is still "non-profit" right? Your salary is a cost, so no profit was made!

    Ummm... no. You'd get in all kinds of trouble for that. Doesn't matter what kind of games you tried to play. Hence, you have to file taxes to show that your operations are indeed non-profit, that the money you receive goes to pay for the operation of your organization, not to enrich yourself.

    If you want an organization to enrich yourself, that's fine, but that is called a business, and you have to pay taxes on that.