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X.Org Foundation Loses 501(c)3 Non-Profit Status
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."
Seriously. How hard is it to file your taxes on time? Or to hire someone to do it for you?
Why do you have to file taxes if you are tax-exempt?
OK, I understand people don't like to TRFA, but did you not even RTF summary? What tricks? The "trick" of revoking tax exempt status for orgs that fail to properly file the required paperwork?
they came for the tea party. I didn't care because I wasn't in the tea party.
OK the article should have said what this means and didn't. The IRS reinstates 501c3 status pretty easily once you clean up your paperwork. You can apply for retroactive reinstatement but that requires a good explanation of why they didn't file, and if X.org's reason is some variant of "we forgot" that won't cut it. This means they are liable for corporate income taxes but I'm sure their expenses easily kill any income. The big problem is often state taxes apply during the period where they are off the 501c3 rolls. But here they might be able to do OK on an appeal.
My guess is that this is not going to be too expensive but it will be annoying.
Tax-exempt status revoked for hundreds of area organizations (If you get a paywall you can get past by saving the site source to your hard drive and opening that up.
So X.org applied for and received 501(c)3 status, and then failed to live to its end of the bargain, resulting in the IRS revoking its status.
Someone please tell me why this really newsworthy? Is it only because its a company related to software? (Of which I bet the majority of /.ers don't even use - and I said majority .. not vocal individuals)
I am Slashdot. Are you Slashdot as well?
And I didn't say anything, because I'm a liberal. ...oh wait, it doesnt matter since I already sold my freedom for security
But now they're going after Open Source ? Color me outraged.
I want to delete my account but Slashdot doesn't allow it.
They didn't file their taxes. It has nothing to do with politics.
"We should tax all foreigners living abroad." - Monty Python
The British Empire did this successfully for hundreds of years. It's a pretty good revenue model, don't knock it.
X.org is the group writing X11. So, no I'd say a large chunk of /.ers if not a majority will use their software during any given decade.
The only software that an absolute majority of /.ers use would probably be Windows and maybe Office. Does that mean that the only software company worth reporting on is Microsoft?
"We should tax all foreigners living abroad." - Monty Python
The British Empire did this successfully for hundreds of years. It's a pretty good revenue model, don't knock it.
The US is one of the few countries that tax it's own citizens while they live abroad. My (half) American friend has to fill out a US tax return every year, although since he lives in the UK the tax he already paid here counts towards (and exceeds) the US requirement.
And start how many trade/real wars by breaking a multitude of treaties?
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.
now we need to go OSS in diesel cars
Spoken like a true fascist who doesn't care that lawful != just.
X.org is not a company. It is is a group of volunteers, either individuals or corporate employees begin donated by their employers. The group writes and maintains the Xserver which is in use on almost every Linux desktop and many embedded systems. This code is given away for free to benefit all who use Linux.
If that doesn't qualify as a 501(c)3 I don't know what would qualify. The group has no revenue, they rely on donations to function and everything they make is given away for free -- to anyone who asks with no restrictions other than some minor licensing terms. And the licensing terms are really minor, like give proper attribution to the authors of the code. The benefit from being a 501(c)3 does not accrue to X.org, the tax benefits goes to the companies donating to the organization since those donations are now tax deductible. Hopefully that means X.org will get more donations.
I do agree that a few companies seem to be abusing 501(c)3 and open source. Those companies are making captive open source projects which basically only benefit themselves. But that's more of a marketing gimmick than a tax avoidance one. The resources being given to the captive 501(c)3 were deductible to the parent corporation anyway. So if the IRS dissolves these captive 501(c)3s they aren't going to get any more revenue. They'll just move where the deductions are being taken.
Actually that is pretty common and your friend can deduct that tax if the UK is a tax treaty member and I am almost sure they are.
This is for a very simple reason, without it all the big earners would simply have their pay given to them in another nation.
X.org is not a company. It is is a group of volunteers
You may want to look up the word company. Also, all they had to do to remain 501(c)3 was to apparently file their paperwork in a timely manner. It would seem that the IRS is more picky about this kind of thing that open source fans are.
This is the type of dirty trick their lobbyists would do.
I doubt Microsoft even knows X.org exists or what they do.
Eagles may soar, but weasels don't get sucked into jet engines.
What part of scrutiny is not lawful?
I want the IRS to investigate 501c organizations of all stripes, frankly many of them are likely frauds.
There's no such thing as a half-citizen of a country. You are a citizen, a permanent legal immigrant, a temporary visitor with a visa, or an illegal immigrant. Taxation varies accordingly. There may even be a category or two in between those, like dual citizenship, but if you're a dual citizen, you aren't automatically assessed taxes in both locations -- other factors come into play.
Yes, Microsoft sent lobbyists to X.Org to prevent them from filing their paperwork on time.
My point went right over your head. Scrutiny can be both lawful and unjust. As can taxes, laws, and punishment for crimes. A fascist who supports the state does not understand this or is entirely willing to overlook this defect.
Meanwhile, no one has a problem with the National Football League being considered "non-profit" by IRS standards ( http://www.usatoday.com/story/sports/nfl/2013/05/29/nfl-sports-leagues-irs-tax-exemption/2370945/ ). I am not saying that X.org did not screw things up, but we certainly have some strange qualifications to benefit from non-profit status. X.org sounds like they had some trouble filing, but I am sympathetic to non-profits in general having difficulty filing. Oftentimes, they really are run by people who are passionate about their cause, but not necessarily familiar with the accounting standards needed to remain in good standing with the IRS. Compliance with reporting requirements can cost you a lot in accounting fees and time.
If I move to Bermuda I'd pay no tax to the UK.
http://rt.com/usa/americans-refuse-citizenship-tax-317/ "The United States is the only country out of 34 in the Organization for Economic Co-operation and Development (OECD) that continues to tax citizens regardless of where they live around the world."
As I just wrote above -- America is an exception when it comes to taxation of citizens living abroad: http://rt.com/usa/americans-refuse-citizenship-tax-317/
(I meant "half" in the usual British sense, i.e. one parent is American.)
So, counselor, in your estimation - is the IRS Inspector General a Tea Party Libertarian employed by Fox News, as well?
Because the IG report basically confirmed what you're trying to hand-wave away - that organizations were targeted for "special" processing which imposed unnecessary burdens on them - for no other reason than their name, or chosen policy positions (e.g., a focus on "government spending").
From the report:
The lesson? Sometimes, the government really *is* wrong when Fox News reports they did something wrong.
It is not hard to remember, in particular because with an organization of any reasonable size you'd want to hire an accountant to do your taxes. If you are a non-profit, you'd hire an accountant who knows how to deal with that.
Any business taxes, profit or non-profit, are a bit complex and this isn't unique to the US. So you hire an accountant. Just part of doing business. My parents used to run a small business in Canada, about 5 employees including themselves. They hired an accountant to do their taxes. It wasn't that expensive and the accountant made sure everything was in order and the Canadian government was happy.
Well same shit here. X.org should have paid someone (or some firm) a couple of grand a year to do their tax accounting.
It was not that IRS had any "hate" for this kind of activity. It was just a series of sloppy club treasers failed to file the necessary paperwork.
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.
Hmm. X.Org must have seen the writing on the wall and decided to get out of the X Window business. I hadn't heard that they were driving Wayland project. Good exit strategy. Likewise Mesa.
I have to side with the IRS on this one. BTW, I'm a software developer
OK, I understand people don't like to TRFA, but did you not even RTF summary? What tricks? The "trick" of revoking tax exempt status for orgs that fail to properly file the required paperwork?
It's one wierd trick.
The problem is that the rules are phenomenally complex.
Sure they are, but that doesn't stop 90% of people from filing on time, or at least filing for the automatic extension. For that matter, nearly every church in the country manages to do the same.
I get the idea that the IRS doesn't revoke the status for 'simple' mistakes, they revoke it for major things like not filing for 3+ years. If they're acting within the rules of an exempt organization, even an audit isn't going to turn up more than minor fines at most, and at best it'd amount to IRS agents helping to fix the paperwork.
FTA:
"The status of the 501c3 is lost because we (me) failed to file the 3 past years' tax returns on time. Note that we've Never filed returns since our first re-organization to the LLC in 2005.
I don't read AC A human right
I think you are misunderstanding what is going on here. X.org qualified as a 501(c)3 corporation. They lost the qualification because they didn't file the required income taxes. This is completely X.org's fault.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
The group has no revenue, they rely on donations to function and everything they make is given away for free
Prove it. Show me the paperwork.
That is the core of the issue. X.org is required to submit proof of this belief on an annual basis to IRS. They didn't do that.
Rod Taylor
Not everyone who supports a state is a fascist.
Lots of things can be unjust but being asked to prove you are supposed to be exempt from taxation is not.
So the "powers that be" infiltrated X.Org's finance/accounting groups and made them not follow the rules for non-profits?
This is no different than the spun up fiasco a few months ago about the IRS investigating non-profits that appeared to be fronts for political organizations (and contrary to the Fox spin, it was not just targeting the Tea Party). To be a non-profit there are some specific rules you have to follow to maintain the status. It is the IRS's job to investigate to make sure you are following those rules.
So the real news here is "IRS does their job and idiots get upset about it and make up conspiracy stories".
I love how everyone here is basically hammering on the point that non-profit companies should by default be required to file taxes, even though they never have to pay them.
I understand that tax policy requires forms. What I'm railing against is that theres always a form and the government keeps asking for more and more forms.
Forms.... the lifeblood of bureaucracy.....
It is pretty messed up, when people cant get off their soap box long enough to read what actually happened.
Or even worse, you did and still think this somehow reflects reality. In either case, you need a reality check. Just make sure you notify the IRS about it after you cash it.
At least the IRS is reasonable in allowing foreign taxes to count against domestic taxes.
It's newsworthy on slashdot because a nerdy site was involved. And I think that an organization responsible for a pervasive technical standard qualifies as nerdy.
This is for a very simple reason, without it all the big earners would simply have their pay given to them in another nation.
Uh, no.
I believe there are three or four nations on the planet who try to tax their citizens no matter where they live, and America is the only first-world nation on the list. It's one reason why the US government have made renouncing American citizenship so hard.
It's the cost of accepting donations. How will the government or even the donors know that everything is above board without regular filings of income statements and tax forms?
"Trust us" isn't good enough.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
Many open source projects and organizations aren't a business, and it can be challenging for nerds to keep track of tax rules for various organization types. Depending on where you have your base the rules may differ, and there may even be rules that exempt you from filing the taxes at all.
Maybe it's time to look around for another home for some non-profit organizations where the political climate is better.
If builders built buildings the way programmers wrote programs, then the first woodpecker would destroy civilization.
I'm not an insider but I suspect this has to do with Oracle's acquisition of Sun. Sun used to take care of X.org. Now that Oracle has swallowed Sun a lot of things that Sun used to do have been cut. So X.org needs some new friend with a legal and tax department to keep everything in order. Groups of volunteer programmers are known not to be competent in these matters.
I was actually talking about the IRS itself, not X.org's accountants.
For tax purposes, the immigration status matters very, very little. You're either nonresident or resident for tax purposes. That's *it*. You can be a resident for tax purposes but illegally present from the point of view of immigration law, for example.
A successful API design takes a mixture of software design and pedagogy.
"Trust us" isn't good enough.
Funny, the NSA seems to think it is...
The new Slashdot. Where truth is modded to troll. This is exactly the kind of thing Microsoft engages in. Anything that is good, and "free" software enrages them to having fits. They can't stand the idea.
Look back on funding SCO to try and cripple Linux. Taking over Nokia to kill off Maemo. And I think they had their filthy hands in this.
What is really sad is that Slashdot is now filled with those that can't see the calculated evil that Microsoft as a company really is.
And being modded down on Slashdot for pointing out even potential Microsoft evil doing shows how things here have changed.
Sad.
* Carthago Delenda Est *
That is funny, but has no relevance to the current topic.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
Seems to me that it is a spiritual quest more than a software project. Let's decide what the spiritual focus is and file some paperwork forgetting this ridiculous tax crap.
This! It's already had a schism, so what else does it need in order to qualify for the benefits religious groups enjoy without the annoying rigmarole of actually filing numbers?
-- Using the preview button since 2005
I was actually talking about the IRS itself, not X.org's accountants.
Your claim was that there is a conspiracy against OSS organizations, but this wasn't some obscure rule or gray area that they used to revoke the status. The X.org accountant also admits that he screwed it up so unless you have evidence that he is a plant by the IRS or "the powers that be" there is no conspiracy evidenced by this case.
The IRS's job is to collect taxes according to the tax law (convoluted though it may be). Part of that job is to make sure that people and businesses are paying what they should be (loopholes aside). This is a clear case of X.org's status was reviewed and the IRS found that they weren't meeting the requirements of the non-profit status. It's really not any different than if you had consistently filed your taxes late, they decide to audit you for it, and they turn up evidence of your unreported eBay store that you are supposed to be paying taxes on. Just because you don't like taxes or don't agree with some particular tax law doesn't make what happens in cases like this wrong.
I'm not denying that there are abuses and things aren't enforced uniformly, but the fact is that they failed to follow the law and were punished for it according to the law.
People complain when a government agency isn't doing their job and you're complaining about them actually doing it. There is no conspiracy here. There is no trampling of freedoms. This is exactly what is supposed to happen in such cases.
I was treasurer of a small non-profit ($200k/yr) and our Form 990 filing ran about 60 pages. That's tedious, but was normally straightforward. The interesting part came when filing for the automatic 3-month extension* (Form 8460?) in the mail. The USPS seems to tuck these forms behind the counter, and wait till the deadline passes. Then the IRS would take a month to tell us that the extension was received 3 days late, and we owed them a fine of $1000/day for 40 days. Then we'd appeal, say we were sorry and it won't happen again and "procedures have been put in place". That would normally appease them. The "procedure" is to use registered mail, or file for the extension immediately at the close of the financial year.
Anyway, my point is that the filing was not trivial. There were many things that could go wrong.
Also, donations over $5000 must be tracked and reported individually. You'll get a big smile from your 501(c)3 accountant if you donate $4999.
* We always filed the extension because, by and large, our books were not stable until well after the regular filing deadline---mostly people "forgot" to cash checks we wrote, so we had to let the checks expire, which took 6 months.
My allegation was that the IRS chose to be stricter with X.org than it is with other nonprofits.
3 years of silence and then a sudden tax exempt revoke is a very cagey response to 3 years of not filing any tax returns.
The IRS shouldn't have waited that long without sending notice.
The fact that the feds and the corporations are in bed elsewhere is also a good reason to at least suspect underhandedness on the IRS's part.
The new Slashdot. Where truth is modded to troll. This is exactly the kind of thing Microsoft engages in. Anything that is good, and "free" software enrages them to having fits. They can't stand the idea.
Look back on funding SCO to try and cripple Linux. Taking over Nokia to kill off Maemo. And I think they had their filthy hands in this.
What is really sad is that Slashdot is now filled with those that can't see the calculated evil that Microsoft as a company really is.
And being modded down on Slashdot for pointing out even potential Microsoft evil doing shows how things here have changed.
Sad.
I agree the moderation was unfair. I don't agree with you, but you weren't trolling.
Microsoft funded SCO because Linux as a server platform is and remains a credible threat, and SCO did a good job of convincing a lot of people that Linux contained violations of their IP. Not anyone that mattered, in the end, but if that had been true their investment would have been very lucrative.
Microsoft "took over" Nokia because there was no one left to partner or buy in the handheld computing space. HP destroyed Palm, Apple is Apple, and everyone else went Android. You think they were at all concerned about something like Maemo in the face of that?
Microsoft does not perceive X as a credible threat on the desktop, because it isn't.
Look, just take a step back and get some perspective. Microsoft is certainly _capable_ of doing the things you accuse them of here, but that isn't the same thing as _interested_. They certainly can't be bothered with competitors whose market shares can only be measured in tenths or hundreds of a single percent.
The final nail in this tin-foil-hat conspiracy theory of yours is the non-profit in question failed to file their taxes. It does not take lobbyists to get the IRS to take action in that scenario. Try it yourself sometime if you doubt me.
Eagles may soar, but weasels don't get sucked into jet engines.
Ummmm, they didn't file on time and *should* pay the price ... hardly targeted.
---- Booth was a patriot ----
Probably someone on the team donated to the Ron Paul campaign..
Prior to 2006, certain 501(c)(3) organizations that normally had gross revenues less than $25,000 were not required to file any tax returns at all. One problem that created is that the IRS had no way of knowing whether organizations that weren't filing returns (1) had gone out of business, (2) had gross revenues less than $25,000, or (3) were supposed to file returns but were failing to do so. So, in the Pension Protection Act of 2006, Congress amended Section 6033(i) to require all Section 501(c) organizations (except churches) to file at least a very abbreviated return (containing six items of information), and it amended Section 6033(j) to provide that any organization, whatever its size, that fails to file a return for three consecutive years would automatically lose its exemption.
Section 6033(j) doesn't give the IRS any discretion in the matter. Failure to file a return for three consecutive years means that tax-exempt status is automatically revoked, whether the IRS takes any formal action or not, and there is no procedure for appeal, either within the IRS or in the courts. Because this is such a draconian penalty, in 2009 and 2010, as the third full year following the 2006 Act began to run out, the IRS was very aggressive (and creative, at least for such a bureaucracy) in trying to get the word out to the nonprofit community, including using podcasts, YouTube videos, radio PSAs, and so on, encouraging them to file returns to avoid losing tax-exemption. It even posted a list of all the organizations that had failed to file for three consecutive years and then allowed them a further grace period to file the necessary returns to avoid revocation. There were something like 400,000 - 500,000 organizations on that list, and probably 90 percent of them did nothing and ended up having their exemption revoked.
Since then, the IRS has announced procedures for getting tax-exempt status reinstated, but that requires filing a new exemption application. Some 50,000 or so organizations that did lose their tax-exempt status have reapplied in the past several years, and that extraordinary, additional workload on the Cincinnati office that processes exemption applications is one reasons why it now seems to take the IRS forever to rule on new exemption applications and is part, but not the only reason for the highly publicized delay in processing Tea Party applications.
My allegation was that the IRS chose to be stricter with X.org than it is with other nonprofits.
3 years of silence and then a sudden tax exempt revoke is a very cagey response to 3 years of not filing any tax returns.
The IRS shouldn't have waited that long without sending notice.
The fact that the feds and the corporations are in bed elsewhere is also a good reason to at least suspect underhandedness on the IRS's part.
Actually, that's pretty normal for the IRS. The IRS is not, actually, much in the habit of giving warnings. It takes them a while to get around to things, and once they do, its pay-up-or-else (or revocation or whatever). They aren't well enough funded to bother with warning notices, or hearings, etc. If you disagree with their finding, there are things one can do and an appeals process, but generally they don't initiate such things except in certain categories of audit issues.
Only if the revenue was earned in a country with a Double Taxation Agreement in place.
For a site about things like basic rights, Slashdot users sure do like to censor "dissent".
What tax? They failed to file a form saying they don't owe any tax!
For a site about things like basic rights, Slashdot users sure do like to censor "dissent".
I know they targeted both groups.
Just about 95% conservative and 5% liberal.
But I see what you're saying.
Look at the lists of questions the IRS has been asking of certain 501c applicants, and tell me they are within the realm of just scrutiny.
Troll? Seriously?
It's one wierd trick.
Nope, one wired trick ;-)
Or.. one wider trick
I hope their accountant has very deep pockets. I would think he would be liable for such a stupid mistake/sabotage!
My karma is bad. Don't get too close!!!