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The New 501(c)(3) and the Future of Open Source In the US
An anonymous reader writes: If you're involved in the free and open-source software movement — especially in the United States — you may want to read through this, as long as it may seem. It appears that the United States' Internal Revenue Service has strongly shifted its views of free and open-source software, and to the detriment of the movement, in my opinion. From the article: "The IRS reasons that since Yorba’s open source software may be used for any purpose, Yorba is not a charity. Consider all the for-profit and non-charitable ways the Apache server is used; I’d still argue Apache is a charitable organization. (What else could it be?) There’s a charitable organization here in San Francisco that plants trees throughout the city for the benefit of all. If one of their tree’s shade falls on a cafe table and cools the cafe’s patrons as they enjoy their espressos, does that mean the tree-planting organization is no longer a charity?"
You'll only give them ideas.
From the wikis: charitable, religious, educational, scientific, literary, testing for public safety
Why do you need to be charity? Why not educational/scientific?
I should use this sig to advertise my book ISBN-13 : 978-1501515132.
The charity plants trees, the city contracts out tree maintenance - limited profit.
Open SW developed, released by charity, for-profit service organization ecosystem springs up to support - loads of profits to companies that contributed resources/finances to development.
I don't agree with IRS in this case, but their reasoning is approximately sound.
You're looking for quotes? See my journal.
If the IRS gets less money then it can't be charity.
Also, they can help you identify the correct party to vote for.
So... a non lawyer got a request from the IRS to explain his charitable status, they decided he wasn't a charity, and now he's posting to a blog that the entire open source world is coming to an end? I think dude needs to spend more time getting a lawyer and less time posting to slashdot.
I HATE the IRS with a passion. This stuff should be easy. But the fact of the matter is, it's not. You need legal representation if you're going to be a 501(c)
Then we have this: "We have no plans to appeal their decision."
ok... so what's the point of this post? If you're agreeing with them, I don't get it. If you're not agreeing with them, but just rolling over, then you deserve what you get.
If the cafe, through it's donation, is able to direct where the charity puts it's trees AND the charity places the tree in a location solely for the benefit of the cafe, then that charity is (in my mind) no longer a charity, it is at least a part-time landscaping firm.
Ken
Hmmmmm.... would this benefit corporate interests? When the government makes any decision that is the only question that needs to be asked. The only time the answer is in doubt is if there are no corporate interests or the corporate interests are exactly balanced.
So while I agree with the sentiment about this being deeply unfair, this is not thereal issue. If anyone wants to be upset about this issue and is willing to do something about it then join the movement to get corporate money out of politics; full stop.
At MIT, lot of research is done and published and the results can be used for anything including making weapons of mass destruction by terrorist and dictators. How come MIT research is tax exempt? In fact, both MIT and Yorba are involved in doing things which are good for the whole humanity without directly profiting from it and hence both should qualify EQUALLY. If one is banned then the other should be as well. In fact MIT and other educational institutions often directly work with commercial organizations and sell their IP for profit and still they are considered charity. If Yorba's purpose is to develop software specifically for commercial organization such as banks or retail stores, then it would have been a different matter.
A couple points - first off, there were hundreds of Patriot/Tea Party groups that applied, not just one monolithic Tea Party organization - each application was unique and individual.
I'm not sure how many of what you refer to as 'Occupy' applications were submitted, by your use I assume it was one.
The Occupy group that got a denial is actually years ahead (literally) of several dozen Patriot/Tea Party organizations that are still waiting YEARS LATER for a decision up or down on their application... So what? A group can not appeal a decision until it is rendered, by denying the Patriot/Tea Party groups a decision, they denied them the chance to appeal, and the appeal process would overturn baseless political denials. A delayed decision is effectively an unappealable denial - your 'Occupy' group, by getting a denial, could appeal - the Patriot/Tea Party groups can not.
Your lone counter-example proves/dis-proves nothing.
BTW, did your 'Occupy' group have their private donor information shared by IRS employees with other, non-governmental groups? Tea Party groups had their donor lists handed over by the IRS to Democrat groups...
You would benefit from an expansion of your news sources to include, maybe source documents and/or actual, under-oath testimony from the people involved...
Ken
I'm glad the IRS is looking into 501(3)(c) organizations that really have no standing to be classified as such. While they're at it, why don't they force the B&M Gates Foundation to stop pretending to be a "charity" and reveal it as the for-profit tax haven that it is? Sure, they throw a lot of money at short-term problems that might help people in the short term, but it seems their primary mission is to establish a dependency on western pharmaceuticals by developing nations. If that's not for-profit, I don't know what is. Capitalists are lining up at the gates (no pun intended) to help push along this tax haven and further its reach. It's disgusting, really.
Citation that the president used the IRS please... Have they found some actual link other then accusations?
When you cant win, ad hominem.
I think everybody is missing the logic of the decision.
This probably isn't concerned with whether an organization like Apache is doing charitable work. All things being equal, the IRS would undoubtedly accept that.
But all things aren't equal, because you have an army of lawyers and MBAs who spend all day thinking about tax avoidance strategies, in an epic arms race with the IRS.
I suspect the root of the issue is companies taking deductions on contributions to open source projects, when the projects are really simply serving and benefiting the companies "donating" the money.
So, for example, take Android. It's possible that Google is (or could be, if they were savvy enough) taking huge deductions on Android by funding the project through an "open source" shell organization.
the current president is mega-corporate bitch; how ironic considering his promises and the beliefs of those who voted for him
On the contrary, liberals love a monopoly too, just for the government.
While this might seem to suck, I know from first-hand inquiries that it is not possible to allow a charitable organization such as a church, for example, that has a kitchen to allow their kitchen to be used even by one of its own members for any kind of commercial purpose, even if the church receives absolutely *NO* benefit from said use. Allowing it would jeopardize the church's tax-exempt status, so it's not allowed.
Really, if you want to be a charity, then you can't allow your resources to be used by people with commercial interests. Sucks for open source organizations that want to act as charities, and I can see it being detrimental for some donations because I know that getting a tax exemption does motivate some people to donate.
But bear in mind that if tax-exemption were really the only reason or even the primary reason why people might donate to a cause or organization that they may believe in, it's highly unlikely that something like crowdfunding would ever work, and we have plenty of evidence to show that it does.
File under 'M' for 'Manic ranting'
This is scary but ultimately a decision that needs to be appealed.
I own a small company that works with Drupal. I am a member of the Drupal Foundation and give as generously as possible to their events.
Similar determinations have been made by the IRS before and challenged successfully. It is important that Yorba stands up for themselves on this matter and establish the scientific and educational validity of their claim to 501 c3 status.
There is an important point in the lifecycle of every open source project, where it goes from being a small hobby to something having an ecosystem that must be managed. It's essential that there is a way to provide fiscal support for groups springing up around the management of these projects without creating a tax burden.
The IRS judgement pertains really seems to only include an established software project, and not one that is supported by a small community. I am not sure there is a way for them to make a determination between the two. IANAL, but I am sure this is important in distinguishing the legitimacy of 501c3 claims.
Hush now, if a tax law has been approved, both agreed to it. Given that they can't agree on the time of day, but have agreed to focus on 501(c), we can assume this annoys all the rich people, not just some ideological faction of them.
My read of this is that they applied as a charity, but the IRS's definition of a charity requires that you be serving a distinct, disadvantaged group of people. A quick look at the software that Yorba produces (http://yorba.org), does not lead me to believe that their software would particularly benefit any specific disadvantaged groups more than other people.
So by the rules that the IRS is working on, it does appear that they do not qualify as a charity. And to be honest, this is a correct definition, they are not running a charity. Now there is a valid question about whether there should be a method for them to run a non-profit without being taxes, but they are not a charity.
As any liberal will tell you, the irs never bullies anyone. It's loving and cares about your needs and concerns.
the current president is mega-corporate bitch;
Unlike which of the previous several?
You're looking for quotes? See my journal.
When I was on a board that was incorporating a not for profit organization it was enlightening to hear that while 501(c)3s dominate the conversation, they aren't appropriate for most causes. Part of my understanding is that a 501(c)3 is a public, mutual benefit corporation where all assets are actually owned by the public, should push come to shove. It seems like for structure, ownership, and purpose, something like a 501(c)4 or (c)8 would be more appropriate. Of course, 501(c)3 has been baked into so many things, that there are orgs that will not donate unless you have a (c)3, even though there are other tax-exempt designations that also give you a break. Of course, IANAL, YMMV, Your state sucks and works differently, etc, etc.
The only thing that can jack up taxes is the government itself.
umm, remind me who is the current MPAA CEO and chairman? Oh yeah, former liberal Democratic Senator, Chris Dodd. Big Media companies have long been the constituents of many liberal dems in Congress, far more than that of Republicans
Get over your fantasy that this guy was the second coming and be an adult. Even if he wanted to he couldn't do most of what he claimed he'd have done. The part that bothers me is that those things that he does have direct control over he hasn't taken in hand but the things that he can't help but follow others over he endlessly cries about obstruction.
He wants to push and punish anyone who doesn't stand with him but at the same time he doesn't come off as being sincere about a lot of his promises that he could have kept with a single pen stroke 5 years ago. He's as much a part of the problem as the do nothing congress. At least the congress understand that unless Obama gets his way they're not going to get anything past him. It's certainly a slow and tedious game of chicken the two are playing.
Obama is far too smart to waste time dealing with the tedious business of actually doing anything.
Besides, he has a Peace Prize.
there were plenty of other groups caught up in that too. many free software and open sourse groups among them, including mine.
that it was only tea party groups is complete cherry picked bullshit and a pre-election diversion away from real issues.
re apache foundation: it and others like it could be viewed as a trade group, the irs worries that corps could launder commercial development through it.
double bullshit on the tea party thing as 501c3 are explicitly not allowed to campaign politically or they lose their tax exempt status.
the whole thing is bullshit all the way down though, two words: professional football. tax exempt charity my ass.
get your info from the SFLC not FOX News.
Really? The RIAA and MPAA are both products of the Hollywood ultra-leftists.Capitalists are, in generally, fairly happy with the core of patent law, that it's a time limited monopoly.
All the NFL's 501(c) status means is that the individual clubs are responsible for paying applicable tax.
That's a flavor of non-profit which is not a charitable organization.
Disclaimer: I am in no way a member of the legal profession nor am I trained in law.
Like any tax authority anywhere in the world, the first thing that the industrialist and "owning" classes do is to minimise their own liabilities and obstruct auditing and regulation (off-shoring, tax havens, and shell companies being examples). The next thing is to increase the liabilities of any emerging competitors and possible competitors, i.e. everyone who isn't already a huge corporation and that they can't buy to add to their portfolios (FOSS means no IP portfolios to add by acquisition as Oracle found out). The ruling elites rely heavily on controlling tax legislation for their own benefit and to ensure as little competition as possible in any way they can; increasing liabilities, increasing the complexity of the tax system and tax laws, increasing the costs of ensuring compliance with tax laws (easy and cheap to a huge corporation, difficult and expensive for small organisations), etc. It really doesn't matter which administration is in office, the process will always be more or less the same: regulatory and administrative capture. The best way we have so far of preventing regulatory and administrative capture is transparent participatory democracy. The current adminsitration in the USA appears to be decidedly anti-transparent participatory democracy. I doubt the next administration, whoever gets in, will be any different. Goodbye democracy, it was nice while it lasted.
Yes, it is called Spoliation of Evidence.
The legal concept that if you cannot provide (or destroy) evidence that is know to exist, then that failure is proof you have something to hide.
Since the emails were known to exist, were promised to Congress, and then later "lost" is proof that there were emails that proved the IRS was being used for political purposes.
Add to that the unusual number and timing of visits to the White House by IRS officials tied to those emails, there is sufficient evidence to show the linkage.
Never answer an anonymous letter. - Yogi Berra
Conservatives are less likely to use it then liberals. The whole IP monopoly concept is something the conservative love.
Yes, it's likely that a person would believe that if they paid attention to what politicians say rather than what they do.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
If only Yorba had a SWAT team instead of just some software...
Pound! Bang! Bin! Bash! is this a shell script or a Batman comic?
Seriously? Which groups were denied status? Occupy Wall Street donations have been tax exempt since at least 2011, since they were being collected by OWS' 'sponsor,' Alliance for Global Justice... which is a Non-profit organization.
Never mind the delightful irony that a group clamoring for higher taxes on the rich is taking advantage of tax exempt status. I can't wait for the rich people to start using OWS as a way of reducing their tax burden!
the current president is mega-corporate bitch;
Unlike which of the previous several?
Every time someone responds in this manner, it reminds me of kindergarten.
"BUT LITTLE BOBBY DID IT TOO, WHY ISN'T HE IN TROUBLE???"
Yes, Virginia, past Presidents have been douchebags in the pocket of major corporations... which has precisely fuck-all to do with the fact Obama is one too.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
One more point: the IRS had an obligation by default to keep those emails, the fact that the were negligent in doing so points to the gross incompetence, not the criminality.
Never answer an anonymous letter. - Yogi Berra
If all the organization does is release code under an open source license, then they're not collecting money. If the organization is charging for services relating to that code, then there's something to tax.
If my garage inflates tires, I'm using a free resource (air). My garage might even inflate tires for free (charity) to get people to come in. That doesn't make my garage a charity.
If the organization doesn't collect money (or turn a profit), then there will be no income taxes to pay. It sounds like some accountant was putting a sticker labeled "apple" on a squash and claiming it was an apple. Somebody at the IRS caught the fudging...
The IRS isn't necessarily saying Yorba can't function as a not-for-profit, but that it doesn't qualify as one under section 501c3. There are other forms of not for profits that may be more applicable. Personally, I would never have thought of Yorba or the other entities listed in the summary as charities, not for profits, yes, just not a charity. The two are not interchangeable terms.
The U.S. is becoming a country in which only the rich get what they want.
501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.
They applied under charity, education, and science. Scientific seems the best bet. By providing source code you could say they are advancing computer science. But it is a stretch. The IRS instead saw Yorba as a provider of free stuff. Free stuff is nice but it isnt' advancing science or education. Free stuff is only charity when it is provided to a disadvantaged group of people according to the IRS. Note that environmental activism does not appear in that list. I don't think planting trees would quilify at all as a non profit. (unless it was done in a disavantaged neighborhood)
If we could get people educated and supportive of the FairTax, these types of problems and discussions would be rendered moot. No IRS, no tax-exempt groups (because there's no need for it), no political power to be wielded or abused.
I don't get how the term teabagger is an insult. A teabagger, as in someone who teabags is rubbing salt in the wound after owning you.
"Lack of speed can be overcome. In the worst case by patience." --Znork
Without some reasonable crackdown, anyone could set up a 501(c)3 that donates software to various entities and - in an unrelated coincidence - receives donations from those same entities (or related entities).
To put it more concretely, Yorba receives money for software development - often but not always by the same people who use the software. This is a normal activity of for-profit companies. You aren't allowed to take a for-profit company, rename "license fees" as "donations", and claim tax exempt status (which has twice the expected effect - once for the "donor" who gets to deduct his software purchase and again for the "charity" which is typically exempt from all sorts of other taxes).
If most of the money came from sources other than the software users - as is in fact the case with people like the Apache Foundation - that would probably be different. If your company looks like a for-profit enterprise (or alternately a hobby) in everything except name though, its going to be treated as such by the IRS.
You're special forces then? That's great! I just love your olympics!
The logic used by the IRS is dubious and daunting. That someone could potentially use something you are giving away for a commercial purpose... does not make sense as reason to deny exemption status.
The propagating effects could be devastating, even beyond open source software. This is basically a blank cheque for them to deny exemption arbitrarily and extrajudicially; if you dig far enough and raise the threshold for degrees of separation as high as you want, you could come up literally any reason you want.
I'm also curious what IRS stands to gain from this decision. An organization that makes no profits pays no taxes. So, what's in it for them to decide this way?
Unfortunately, this is a reality for some entities that choose to do-it-yourself with 501(c)(3) applications rather than seek legal advice. An attorney can guide an organization through the very precise and specific requirements necessary to acquire federal tax exemption status--or, help an organization to find other legal methods to similarly achieve its objectives.
Even if 501(c)(x) status was approved, an entity must still typically maintain that status (along with any state or other requirements). Many often confuse the non-profit or not-for-profit entity, which is almost always organized under state law, with obtaining federal 501(c)(x) status, which attaches to the entity. These are two different processes with extremely different requirements and different requirements to maintain.
I don't want to sound like an attorney-apologist. But 501(c)(x) status can be a challenging process--as it should be because it is supposed to be an extraordinary classification. Most realize that anyone can download the forms and possibly even put something in the boxes. But that does not mean that one fully understands the legal aspects of the task or risks.
But rather than reading too much into a single IRS determination letter, hopefully, others can learn an invaluable lesson--and avoid a not-atypical 4 year wait (especially if the initial application requires multiple rounds of clarifications because it was not completed adequately) and potential frustration of donors.
First, your delusion about the word "subsidy": When the government GIVES you money (and NOT as payment for a service) THAT is a subsidy. When the government does not take money from you THAT is NOT a subsidy. A Tax cut/break is NEVER a subsidy. It does not matter if the government decides it still needs the cash and gets that cash elsewhere... YOU being allowed to keep YOUR money is NOT a "subsidy" unless your brain is completely pickled in Marxist fluids
Second, Not all "Tax exemptions" are the same. Organizations filed as 501c(3) like the poster tried may indeed collect tax-exempt donations (money that was not taxed) but there's nothing saying all their money WILL be pre-tax cash. Organizations filed as 501c(4) get non-tax-exempt donations (the donors have already paid the tax) and THIS is the type of organization the TEA Partiers were filed as. In both cases, the organizations are applying not to be taxed on the money they collect (which would be a double-tax in the 501c(4) case) since they are not operating to generate revenue (they're not "for profit")
In what bizarro world do you live where the automatic assumption is that if government cannot add a NEW TAX to a NEW ENTITY (thereby increasing cashflow to the government) it MUST then increase taxation on somebody else????? In such a world, the default idea is clearly that all money belongs to government and the people only have what they have because government (temporarily) lets them hold things.... until its needs grow large enough that it must sieze them. That's 180 degrees out from the system our founders created.
+2 Funny and insightful
SoylentNews has decided to avoid non-profit status due to the demands it puts on the organisation, so they're now trying to set up as a slightly more normal "we don't actually want to make money" benefit corporation.
Ask me about repetitive DNA
Every Sunday morning, you worship your pillow.
Q: What does the "B." in Benoit B. Mandelbrot stand for? A: Benoit B. Mandelbrot
BTW, did your 'Occupy' group have their private donor information shared by IRS employees with other, non-governmental groups?
This is illegal. To understand why, consider that the supreme court ruled it illegal in the last century when several southern states wanted to find the list of donors to the NAACP.
"First they came for the slanderers and i said nothing."
From the Fed, rolling over loans for zero cost funding.
I haven't been following that particular escapade. All I will say is that culpability is suspected at this point -- but not entirely proven.
Sometimes boldness is in fashion. Sometimes only the brave will be bold.
Consider the high percentage of University/College grads who go on to work for companies.
Sometimes boldness is in fashion. Sometimes only the brave will be bold.
This is another example of our government officials who speak out in public but have no damn clue what the hell comes out of their mouth.
The W3C is not a 501(c)(3) organization. They are a regular corporation that just doesn't happen to make a profit, so no taxes. It is actually easier that way.
a CEO of a for profit company might have a house plant which uses the CO2 which a charitable officer breaths out.
it should be eliminated now.
This is why we have drones capable of carrying the latest in Hellfire missile tech flying over major population centers in the US.
We only need to give the one command, and all of these miscreants are paste on the sidewalk.
You are welcome.
--- Say something clever. Pretend it was me. Thanks.
Makes no difference.
The teagaggers got their exception, Occupy didn't. Case closed, conservatives NOT attacked.
No, it is not illegal as long as it STAYS INSIDE the IRS!
Wrong. Occupy was not granted 501(c) status, unlike FreedomWorks a wholly owned subsidiary of Richard Armey and Charles and David Koch
wrong, we can call him out on it because unlike his predecessor he said he was going to end such things. Mr. hopey changey transparency, pick zero of those
It is legal proof of wrong doing, not a logical or scientific proof. By those standards, it is an assumption.
But if Spoliation is in evidence, then the alleged wrongdoing is "proved" too have happened and a jury can be instructed to consider it proved.
AS for the emails, the IRS has a requirement to keep them for 7 years, and that is done on the servers, they use exchange.
ALso, they are required to make hard copy prints of critical emails. Not having those printed files is proof of not following the email retention standards.
Never answer an anonymous letter. - Yogi Berra
Capitalists are, in generally, fairly happy with the core of patent law, that it's a time limited monopoly.
There shouldn't be any monopoly at all.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.