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IRS policy denies tax-exempt status to open source non-profits

arstechnica.com

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Re: IRS policy denies tax-exempt status to open source non-profits

#11

Post by stephencanon »

duaneb wrote: post #8
chollida1 wrote: post #5

TL/DR just because you release OSS does not mean you get to be a charity:) From the previous discussion this link is probably the best advice someone can get: https://news.ycombinator.com/item?id=7969202 > Generally speaking, they may not like that a for-profit business can use your organization's by-product to make lots of money for themselves. > Nevertheless, just releasing OSS is NOT an exempt purpose. If you read…

Wouldn't this fall under "scientific advancement"? That's a dangerous term to say the least, but it's technology that benefits everyone.

Writing software, in and of itself, does no more to advance science than building houses does to advance structural engineering.

If they are specifically writing software to be used for scientific research, or are carrying out significant research into computing and releasing papers/patents freely, then they might qualify.

Re: IRS policy denies tax-exempt status to open source non-profits

#12

Post by dnautics »

pdabbadabba wrote: post #9
chollida1 wrote: post #5

TL/DR just because you release OSS does not mean you get to be a charity:) From the previous discussion this link is probably the best advice someone can get: https://news.ycombinator.com/item?id=7969202 > Generally speaking, they may not like that a for-profit business can use your organization's by-product to make lots of money for themselves. > Nevertheless, just releasing OSS is NOT an exempt purpose. If you read…

This is exactly on-point, and bears repeating: simply not seeking to make a profit does not make an organization eligible for 501(c)(3) status. The organization must have an exempt purpose, one that is "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals." Charitable, in turn,…

The IRS is also concerned about corporations intentionally spinning off projects for the purpose of sheltering some of their activities from taxation.

What red flags you normally for things like that is explicit connections to the for-profit (shared officers, board members, highly paid employees, etc.)

Re: IRS policy denies tax-exempt status to open source non-profits

#13

Post by pdabbadabba »

cscurmudgeon wrote: post #10
pdabbadabba wrote: post #9

Earlier quoted context omitted.

This is exactly on-point, and bears repeating: simply not seeking to make a profit does not make an organization eligible for 501(c)(3) status. The organization must have an exempt purpose, one that is "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals." Charitable, in turn,…

> maintaining public buildings, monuments, or works I'd say Yorba falls under that if you take "works" to include digital artifacts.

Sure, if "maintaining a work" counted, the standard would be pretty easy to meet!

But it's not just "works" but "public works." As in, "a broad category of infrastructure projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community." http://en.wikipedia.org/wiki/Public_works (Yes, it's Wikipedia, but this definition is about right.)

Re: IRS policy denies tax-exempt status to open source non-profits

#14

Post by [deleted] »

cscurmudgeon wrote: post #10
pdabbadabba wrote: post #9

Earlier quoted context omitted.

This is exactly on-point, and bears repeating: simply not seeking to make a profit does not make an organization eligible for 501(c)(3) status. The organization must have an exempt purpose, one that is "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals." Charitable, in turn,…

> maintaining public buildings, monuments, or works I'd say Yorba falls under that if you take "works" to include digital artifacts.

[deleted]

Re: IRS policy denies tax-exempt status to open source non-profits

#15

Post by Karunamon »

stephencanon wrote: post #11
duaneb wrote: post #8

Earlier quoted context omitted.

Wouldn't this fall under "scientific advancement"? That's a dangerous term to say the least, but it's technology that benefits everyone.

Writing software, in and of itself, does no more to advance science than building houses does to advance structural engineering. If they are specifically writing software to be used for scientific research, or are carrying out significant research into computing and releasing papers/patents freely, then they might qualify.

So let's look at some of the existing ones like Wikimedia or Apache. What are they doing to claim that particular exemption?

Re: IRS policy denies tax-exempt status to open source non-profits

#16

Post by chc »

cscurmudgeon wrote: post #10
pdabbadabba wrote: post #9

Earlier quoted context omitted.

This is exactly on-point, and bears repeating: simply not seeking to make a profit does not make an organization eligible for 501(c)(3) status. The organization must have an exempt purpose, one that is "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals." Charitable, in turn,…

> maintaining public buildings, monuments, or works I'd say Yorba falls under that if you take "works" to include digital artifacts.

I think "works" can include digital artifacts — to my understanding, this was part of the Mozilla Foundation's rationale for exemption. But Mozilla's "public work" was the Internet as a free platform, not just some piece of software used by some unidentified group of people. Mozilla compared the Internet to a public road, and depicted its role in maintaining the Web as a free and open platform as being similar to ensuring that roads are well-kept and accessible to everyone.

Yorba's application appears to have been more along the lines of, "We make free software. Poor people can use free software and other programmers can learn from it." (I'm basing this on the IRS's response — I can't find a full copy of Yorba's application anywhere.) So I can kind of see why that appears less compelling from a "public works" perspective to the IRS.

Re: IRS policy denies tax-exempt status to open source non-profits

#17

Post by cscurmudgeon »

pdabbadabba wrote: post #13
cscurmudgeon wrote: post #10

Earlier quoted context omitted.

> maintaining public buildings, monuments, or works I'd say Yorba falls under that if you take "works" to include digital artifacts.

Sure, if "maintaining a work" counted, the standard would be pretty easy to meet! But it's not just "works" but "public works." As in, "a broad category of infrastructure projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community." http://en.wikipedia.org/wiki/Public_works (Yes, it's Wikipedia, but this definition is about right.)

Isn't free open source a public work? It seems to meet the criteria as almost everyone has a computer...

Re: IRS policy denies tax-exempt status to open source non-profits

#19

Post by stephencanon »

Karunamon wrote: post #15
stephencanon wrote: post #11

Earlier quoted context omitted.

Writing software, in and of itself, does no more to advance science than building houses does to advance structural engineering. If they are specifically writing software to be used for scientific research, or are carrying out significant research into computing and releasing papers/patents freely, then they might qualify.

So let's look at some of the existing ones like Wikimedia or Apache. What are they doing to claim that particular exemption?

I expect that they aren't claiming a scientific purpose. More likely they claim to be educational, or that they provide a public work.

Re: IRS policy denies tax-exempt status to open source non-profits

#20

Post by lacksconfidence »

Karunamon wrote: post #15
stephencanon wrote: post #11

Earlier quoted context omitted.

Writing software, in and of itself, does no more to advance science than building houses does to advance structural engineering. If they are specifically writing software to be used for scientific research, or are carrying out significant research into computing and releasing papers/patents freely, then they might qualify.

So let's look at some of the existing ones like Wikimedia or Apache. What are they doing to claim that particular exemption?

at least in the case of wikimedia, software is merely a byproduct of their goal. To quote their main page:

    Wikimedia is a global movement whose mission is to bring free educational content to the world.
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