IRS policy denies tax-exempt status to open source non-profits • Hacker News Board

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

#31

Post by quadrangle » Thu, Jul 03, 2014, 12:28 AM UTC

orlp wrote: post #29

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,…

I'd say that open source qualifies as a public work.

Indeed, while many concerns about Yorba are valid, the IRS claim that FLOSS is not "public work" is troubling and nonsensical. Yorba is not a charity, and not all public work deserves 501(c)(3) status, but FLOSS is public work.

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

#32

Post by kijin » Thu, Jul 03, 2014, 12:30 AM UTC

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?

In a different thread a couple of days ago, someone mentioned that Apache got a scientific exemption.

Which is not surprising at all, since the Apache HTTP Server had its roots in the National Center for Supercomputing Applications (NCSA), a scientific institution.

Python Software Foundation also got a scientific and educational exemption.

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

#33

Post by cscurmudgeon » Thu, Jul 03, 2014, 12:38 AM UTC

npizzolato wrote: post #28

cscurmudgeon wrote: post #17

Earlier quoted context omitted.

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

It seems like "financed and constructed by the government" is a pretty important clause in that definition.

It is a clause in the Wikipedia definition of what constitutes public works. Does the IRS use the Wikipedia definition?

http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organi...

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

#34

Post by [deleted] » Thu, Jul 03, 2014, 1:18 AM UTC

quadrangle wrote: post #31

orlp wrote: post #29

Earlier quoted context omitted.

I'd say that open source qualifies as a public work.

Indeed, while many concerns about Yorba are valid, the IRS claim that FLOSS is not "public work" is troubling and nonsensical. Yorba is not a charity, and not all public work deserves 501(c)(3) status, but FLOSS is public work.

[deleted]

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

#35

Post by pdabbadabba » Thu, Jul 03, 2014, 1:20 AM UTC

cscurmudgeon wrote: post #33

npizzolato wrote: post #28

Earlier quoted context omitted.

It seems like "financed and constructed by the government" is a pretty important clause in that definition.

It is a clause in the Wikipedia definition of what constitutes public works. Does the IRS use the Wikipedia definition? http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organi...

Can't immediately find any IRS documents defining the term, but here is the definition from Black's Law Dictionary:

> Structures (such as roads or dams) built by the government for public use and paid for by public funds.

There is also a maxim of statutory interpretation in law that a word it known by its fellows. In this case, that would mean preferring an interpretation of "public works" that yields a certain kinship between that term and "public building" and "monuments." This would seem to militate in favor of the Black's/Wikipedia definition. Note also that these three are followed by "lessening the burdens of government" which might be another hint. (I.e., organizations that support public works are deserving of tax exempt status because they lessen the burdens of government.)

I can also tell you anecdotally that, at least among lawyers, the term is very well known and is definitely widely understood as having the definition given by Black's and Wikipedia. There may be a creative argument to be made that an open source project is a public work (could make a fun law review article!), but I doubt it would go very far.

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

#36

Post by pdabbadabba » Thu, Jul 03, 2014, 2:08 AM UTC

virtue3 wrote: post #22

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,…

They tried to make the actual points. But they got shot down pretty hard. The real issue seems to be that providing the work without illustrating and tracking who uses the software (so that you're being charitable and helping the less fortunate) means you aren't being charitable... http://blogs.gnome.org/jnelson/2014/06/30/the-new-501c3-and-... Personally, they're one of the places I interviewed at right out of colle…

Yeah, I wish they hadn't been denied as well, particularly given that it probably would have been possible for them to get it if they were really committed. But they would really need to retool their website and other materials (and, if necessary, their actual organizational mission) to communicate the fact that they have some goal other than just making free software. As you say, this could have included taking some concrete steps to ensure that their software benefitted the poor.

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

#37

Post by pdabbadabba » Thu, Jul 03, 2014, 2:12 AM UTC

orlp wrote: post #29

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,…

I'd say that open source qualifies as a public work.

Yeah, the IRS's letter is incomprehensible on this point. Maybe I can help: at it is typically understood, a "public work" is something like a dam, or bridge, or sewer system. As Black's Law Dictionary defines the term, public works are "structures (such as roads or dams) built by the government for public use and paid for by public funds."

It is impossible to know whether this is what the IRS had in mind. But I can tell you that, according to my understanding of the term, and the dictionary definition, it seems pretty clear that it does not cover open source software.

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

#38

Post by shard972 » Thu, Jul 03, 2014, 4:08 AM UTC

virtue3 wrote: post #22

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,…

They tried to make the actual points. But they got shot down pretty hard. The real issue seems to be that providing the work without illustrating and tracking who uses the software (so that you're being charitable and helping the less fortunate) means you aren't being charitable... http://blogs.gnome.org/jnelson/2014/06/30/the-new-501c3-and-... Personally, they're one of the places I interviewed at right out of colle…

> The real issue seems to be that providing the work without illustrating and tracking who uses the software (so that you're being charitable and helping the less fortunate) means you aren't being charitable...

Seems like a pretty shitty reason to deny a possible open source company non-profit status on the grounds they aren't tracking their users.....

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

#39

Post by pdabbadabba » Thu, Jul 03, 2014, 6:12 PM UTC

dnautics wrote: post #18

suddenly seems like it was a bad idea to bill my nonprofit (details in profile) as an effort to make open-source pharmaceuticals.... My application has been in the queue for more than a year.

Hard to say. Hire a lawyer if it's important. This stuff is not easy.