IRS says free software projects can NOT be nonprofits

From: Mike Harrison 
Link stolen from a G+ post by Jason Brown..

=============================================================== From: Chris Mowery ------------------------------------------------------ From The exempt purposes set forth in section 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. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency. It seems like advancement of education or science would fit with makerspaces as well as free software projects. I don't see how it wouldn't. - Chris On Wed, Jul 2, 2014 at 10:40 AM, Mike Harrison wrote:

=============================================================== From: William Roush ------------------------------------------------------ Yeah this was all over Reddit yesterday...

=============================================================== From: Rod-Lists ------------------------------------------------------ As someone who has worked with non-profits and done 3rd party organizing, I've a different perspective. Pre Citizens United, 3rd political parties (say Hamilton County Pirate Party) were trained to do the following; form a PAC to fund candidates and form a non-profit to do issue education. The non-profit couldn't support candidates only issue ads, such as save the whale or the everglades. And the majority of their work had to be towards that issue though they could lobby or educate the public on that issue in the process. But the majority of their activity must be non-political. PAC's have to submit their lists of their donors to the FEC. Non-profits do not have to expose their donors. Citizen's United blew open some loopholes that various groups are using to hide their donors. Enter Crossroads GPS which spent $174 million dollars on political ads one year. Does anyone believe that 70% of their activity is non-political? The real IRS scandal was that most of those groups regardless of their political leanings were allowed to keep their tax exempt status. BTW only progressive groups lost their status. ----- William Roush wrote:

=============================================================== From: William Roush ------------------------------------------------------ While that is definitely an interesting perspective (and am interested in reading more about the interesting political tie issues and preferential treatment the IRS has seem to have given), it seems pretty off topic on the idea that the IRS has /never/ treated FOSS projects as immediate eligibility for 401(c)(3), at least as far as I know. William Roush 423-463-0592

=============================================================== From: Jason Brown ------------------------------------------------------ Unfortunately the wording of the denial letter is disturbing. Some out of context excerpts to make them sound worse (as if that were possible). From here: *> "You have a substantial nonexempt purpose because you develop software published under open source compatible licenses that authorize use by any person for any purpose, including nonexempt purposes such as commercial, recreational, or personal purposes, including campaign intervention and lobbying."* * > "=E2=80=A6public works must serve a community. Open source licensing e= nsures the Tools are accessible to the world. We have not found any authority for the proposition that the world is a community within the meaning of =C2=A7 501(c)(3)."* Short sighted much? * >"Accordingly, because you do not limit use of the Tolls to a charitable class, the development and distribution of the Tools to the public under open source licenses is not the the of benefit to the community .... and doe not further a charitable purpose".* Because only the underprivileged should be able to use open source software... On Wed, Jul 2, 2014 at 1:03 PM, William Roush wrote: al he , I've a different perspective. rty) were trained to do the following; form a PAC to fund candidates and f= orm a non-profit to do issue education. The non-profit couldn't support can= didates only issue ads, such as save the whale or the everglades. ould lobby or educate the public on that issue in the process. do not have to expose their donors. o hide their donors. e year. litical leanings were allowed to keep their tax exempt status.

=============================================================== From: William Roush ------------------------------------------------------ Welcome to laws and policy, where clear definitions as to what are allowed and what not are provided, and it's less about how people feel. The requirements are pretty clear and open source clearly doesn't fall inside of it. As far as I see it the IRS is just doing what it's supposed to. The entire statement is 100% within the laws and regulations of 501(c)(3) anything else would be the IRS violating law to prefer open source... I guess I don't get the outrage because this is nothing /new/, the IRS' stance hasn't changed, and no one has pushed anyone at congress to make any changes to this, so why do we expect FOSS to fall under 501(c)(3)? It has a much more complex legal meaning than "company that gives stuff away". Again though following that logic: does that mean that companies like Nexenta, Alfresco Software and /Microsoft/ should get 501(c)(3) because they write open source software? That kind of wide paint brush seems to be much more short sighted. Plus even the GNU GPL's FAQ by the FSF goes over the concept that open source != non profit software. William Roush 423-463-0592

=============================================================== From: William Roush ------------------------------------------------------ Also: I'm totally up for the discussion on what changes could be made to widen the requirements for entities that do center around community contributions, but that line needs to be pretty solid on what is 501(c)(3) and what is just a company that releases free open source software but is still primarily a for-profit business. But that's just it: they would be changes. William Roush 423-463-0592

=============================================================== From: Jason Brown ------------------------------------------------------ I have no doubt that it follows the letter of the law, I am curious however how Mozilla, the Apache Foundation, and many many others are going to be affected by this. Many of these project rely heavily on donations from users and corporate entities to operate. Without that tax break there is much less incentive for making those contributions. (Financially anyway, I donate to projects I like out of my own pocket when possible). Also, I know nothing about the Yorba Foundation and for all I know they could completely deserve this ruling. If have inadvertently contributed to FUD and marketing spin, my sincere apologies now. --Jason On Wed, Jul 2, 2014 at 4:35 PM, William Roush wrote:

=============================================================== From: William Roush ------------------------------------------------------ I don't see why Apache, Mozilla, etc. will be affected, they already cleared 501(c)(3) with the IRS. I know Mozilla spends a lot of time and money into open research of new technologies, languages and specifications, probably falls under advancement of science for those (just some speculation though, but I can see them arguing things like that). Not too familiar with Apache's contributions but they've already passed under these laws. William Roush 423-463-0592

=============================================================== From: Rod-Lists ------------------------------------------------------ ----- Jason Brown wrote: BIngo William! That's what is disturbing them is that a lot of open source code is being used in campaign efforts. Need send that to Bruce Perens. Make sure he is aware of this.

=============================================================== From: ------------------------------------------------------ The difference between the Mafia and the IRS is that the the Mafia has a code of HONOR! What can you expect? ... :( Mike Harrison writes:

=============================================================== From: Rod-Lists ------------------------------------------------------ I forwarded Mike's post to Bruce Perens. We've been discussing Ham stuff.He sent the reply below. BTW Mike I'll get with after My wifes Medical appointment. =========================== This is going to make a great court case. I think we can show that any number of charitable non-profit activities can be of benefit to for-profits. And we'll win. Thanks Bruce ----- Mike Harrison wrote: