IRS Targeted Open Source Groups Seeking Non-Profit Status
from the don't-they-have-better-things-to-do-with-their-time dept
The latest revelations into the IRS improperly targeting certain types of groups seeking non-profit status revealed a bit of a surprise: open source software operations were apparently a trigger for extra scrutiny. The "be on the lookout" list the IRS used in 2010 included the following entry:Open Source SoftwareKevin Drum wondered why that would happen, and a reader of his sent in an explanation, suggesting that the IRS suspected that many open source projects were really commercial projects in disguise, and the attempt to get non-profit status was to hide a commercial endeavor:
These organizations are requesting either 501(c)(3) or 501(c)(6) exemption in order to collaboratively develop new software. The members of these organizations are usually the for-profit business or for-profit support technicians of the software.
There is no specific guidance at this point. If you see a case, elevate it to your manager.
In short, the IRS is concerned that some of these organizations exist simply to market companies' software, and perhaps the associated services sold alongside them. The IRS suspects that such organizations would be a better fit for 501(c)6 classification, if anything.Honestly, this raises questions about the whole concept of what qualifies as a "non-profit" in the first place, but targeting open source software operations, considering how important open source software has been to the growth of technology and innovation over the past two decades, is fairly crazy when you think about it.
I worked in the field for several years, and while it'd be pretty easy to convince me that some of these organizations deserve closer scrutiny, the IRS' "screening" has been wildly disproportionate. Groups that are unquestionably above board have been in limbo for years, unable to start fundraising in earnest, because the IRS refuses to finally approve or reject their application for 501(c)3 status.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: irs, non-profit, open source, software
Reader Comments
Subscribe: RSS
View by: Time | Thread
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
As for why groups are in limbo for so many years, budget cuts have consequences. The US's population keeps on growing, but the last 10 years the IRS has had it's budget cut by 18%, all while tax laws got longer and more complicated. IRS budget cuts are short sighted, as the CBO has shown that every dollar given to the IRS brings in $10 from them catching tax cheats.
Also, despite the initial reports on the IRS targeting conservative groups, the IRS ALSO gave the same tougher looks at non-profit groups with 'Progressive' and 'Occupy' in their names, and that the only group the IRS officially rejected for tax exempt status was a liberal group.
[ link to this | view in chronology ]
Re:
Therein lies a major problem, complex laws ensure that everybody breaks them, unless they can afford the tax specialists to ensure that they stay on the right side of the law. This benefits large corporations at the expense of small companies.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re: Re: Re:
Fixed that for you.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re:
But of course the teabagger whinybabies saw another big chance to throw a hissy fit over being "persecuted", and an inept press helped them blow this nothing into a "scandal".
As to open-source software, it (including its social structure) has a good case that it's the most important cog in the Internet/tech revolution. But that has nothing to do with the IRS, especially given that pretty much no pols and few bureaucrats grasp anything about networks and its tech -- look at he patent/copyright courts, for example.
Bottom line is, the whole 501(c) law needs drastic revision or, maybe better, a quick demise. Either you're a traditional charity or you pay the tax. Simple enough.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re:
Just another in many of examples showing Darryl Isa and friends to be a liars and asshats.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
If they had evidence of this sort of activity and had a few other corroborating factors other than just "OMG, an open-source non-profit!" it would be a fair enough policy.
If.
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Just another indicator
[ link to this | view in chronology ]
Re: Just another indicator
[ link to this | view in chronology ]
Hmm... don't remember this being an issue
In the end, it was just a matter of filing paperwork after a probationary period (which in itself wasn't a big deal) - of which we were the bigger roadblock, not the IRS.
In any case, maybe this was all easier 4-5 years back and it's only become more difficult recently.
[ link to this | view in chronology ]
More evidence the tax code needs an overhaul
[ link to this | view in chronology ]
Easy Fix
[ link to this | view in chronology ]
Re: Easy Fix
How about "No income tax," do away with the whole problem. Use a land value tax and other taxes on privilege.
[ link to this | view in chronology ]
Re: Re: Easy Fix
[ link to this | view in chronology ]
Re: Re: Re: Easy Fix
[ link to this | view in chronology ]
Re: Re: Re: Re: Easy Fix
[ link to this | view in chronology ]
Re: Re: Re: Easy Fix
[ link to this | view in chronology ]
Re: Re: Re: Easy Fix
In other words, give the ultra-wealthy an even greater advantage and encourage them to accelerate even further the wealthy disparity in the US?
[ link to this | view in chronology ]
Re: Re: Easy Fix
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Income Taxes
There are a couple of proposals floating around to do this.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
I started an Open Sourced based Non-Profit
The IRS wanted me to call the local 'similar' businesses to ask for pricing.
200 called. 10 responded.
[ link to this | view in chronology ]