[Board] Questions from IRS vs our 501(c)(3) status
Andrew Ross
andrew.ross at eclipse.org
Tue Nov 13 18:22:44 PST 2012
Hi Everyone,
I want to say kudos to Daniel for all his work here.
Board, know that LocationTech is supportive in any case.
The Eclipse Foundation provides services to working groups which
includes accounting, legal, marketing, IT, etc. The result is a lot like
a Foundation within a Foundation without the pain of the overhead of
running a legal entity.
That said, a decision on what's best will come before it's clear if
there's any need or value to explore if Eclipse Foundation staff can help.
We're here if you need us.
Andrew
On 11/13/2012 03:04 PM, Cameron Shorter wrote:
> Andrew,
> I hope that you can monitor this email thread we are having, and
> potentially suggest options with regards to LocationTech.
>
> On 14/11/2012 3:03 AM, Peter Batty wrote:
>> I have the same question as Jachym - could someone provide a summary
>> with more information on what we have been doing with our sponsorship
>> program? During my year on the board I don't recall much if any
>> discussion, or activity on this that I've been aware of. If someone
>> could explain a bit more background and history on the program that
>> would be helpful to me, and I suspect to some others.
>>
>> I'd also agree with Cameron's observation that *perhaps* some of this
>> discussion may tie in with the discussions on how we relate to
>> Eclipse LocationTech. It could be that if we decide not to set up a
>> for profit subsidiary at this time, maybe there is some way to
>> collaborate with Eclipse on sponsorship programs. I'm sure there will
>> be some strong views on that and I'm not advocating for or against
>> it, just saying that I think it may be worth thinking about as we
>> consider various options here. Would there be a way we could
>> designate an "OSGeo sponsorship program" but have Eclipse run the
>> finances of that for us? Or is that giving up too much that we want
>> to "own"? Or on the other hand is it too much overhead to set up and
>> manage a for profit subsidiary, when we have very little focus on
>> fund-raising or appetite for it during the time I've been on the board.
>>
>> These are very fundamental questions about what we want OSGeo to be
>> in the future, and I think it's quite hard to make progress on these
>> (and especially hard to reach conclusions) via email or IRC. Where do
>> we stand on having a face to face board meeting, which is something
>> we said a while ago we would organize once the new board was in
>> place? It seems to me as though a face to face meeting of most of us
>> at least might be the best way to try to reach some conclusions, if
>> we can get together reasonably soon.
>>
>>
>> On Tue, Nov 13, 2012 at 1:14 AM, Jachym Cepicky
>> <jachym.cepicky at gmail.com <mailto:jachym.cepicky at gmail.com>> wrote:
>>
>> Daniel,
>>
>> thank you very much for taking care of this. The explanation you
>> provided seems to be quite clear even to me (European, with as
>> much as
>> no-tax law knowledge).
>>
>> One question from my side: how active as or is at the moment our
>> project
>> sponsorship program?
>>
>> Thanks
>>
>> Jachym
>>
>> Dne 9.11.2012 05:51, Daniel Morissette napsal(a):
>> > Hi Board,
>> >
>> > I spoke to our attorney last week and got some answers to Frank's
>> > questions below which I also had:
>> >
>> >
>> > On 12-10-30 1:23 PM, Frank Warmerdam wrote:
>> >>
>> >> It would be helpful to have some sense of:
>> >> - the cost/complexity of setting up a "for profit" subsiduary.
>> >
>> > The cost of setting up a corporation is low. It is the
>> accounting and
>> > whatever professional support we use in managing it that is the
>> main
>> > cost (expect 5k$ to 10k$ per year?). My advice for the future
>> will be to
>> > use a book keeper and accountant to manage OSGeo stuff instead
>> of trying
>> > to do things ourselves as we have in the past.
>> >
>> > I know we've discussed and agreed to this before, but the
>> problem is
>> > that being canadian I do not know any book keeper and CPA that
>> knows the
>> > US law (I can point you at several canadian ones though), and
>> the quote
>> > we got earlier this year from an organization specialising in
>> this kind
>> > of admin services was way too high. More research will be
>> required on
>> > that front.
>> >
>> >
>> >> - the practicality and implications of us opting instead of
>> 501(c)6
>> >> status.
>> >
>> > Sounds like c6 is not an option for us either. And anyway it
>> seems that
>> > our type of org would not be a good fit for a c6 which is for
>> "Business
>> > Leagues, Chambers of Commerce, Real Estate Boards, etc." i.e. a
>> group of
>> > corporations working on a common goal which is NOT providing a
>> direct
>> > business advantage to any of the members. Our members are not
>> businesses
>> > so that solves the question.
>> >
>> > The issue is not one of c3 vs c6, it's about being a non profit
>> of any
>> > category. Non profits (c3 or c6) are simply not allowed to
>> engage in
>> > activities that would compete with taxable corporations. Those
>> taxable
>> > corporations (e.g. proprietary software vendors) are
>> complaining to the
>> > government that open source foundations with a c3 status
>> compete with
>> > them with an unfair advantage... that's the root of the problem.
>> >
>> > It seems that our only option if we want to maintain the project
>> > sponsorship program is to move it to a taxable subsidiary (for
>> profit
>> > corporation) which would be 100% owned by the 501c3 foundation.
>> It could
>> > even return all of its profits (if it makes any) as a donation
>> to the c3
>> > foundation.
>> >
>> > With respect to the FOSS4G, my interpretation is that we could
>> possibly
>> > keep FOSS4G inside the c3 foundation if we treat the booth and
>> > advertizing revenues (a small subset of the FOSS4G sponsorship
>> amounts)
>> > as "unrelated business income" (UBI). There is a cap of max 15%
>> of your
>> > total revenues/donations as a c3 that can come from UBI. I also
>> believe
>> > that you need to pay taxes on UBI.
>> >
>> > e.g. on a 5k$ sponsorship which includes a booth and a 1/4 page
>> ad, we
>> > would treat e.g. 500$ for the booth and 500$ for the ad as UBI,
>> and the
>> > remaining 4000$ as a donation. It would actually be even better
>> to avoid
>> > the ads and just include "thank you" notes in our program and
>> > banners/slides. That would leave only the booth revenues to
>> deal with as
>> > UBI.
>> >
>> >
>> >> - the tax implications for us of failing to achieve any sort of
>> >> 501(c)x status. (ie. will we have a big back tax bill)
>> >>
>> >
>> > I got some hints but no clear answer on this.
>> >
>> >
>> >
>> > So the question we need to ask ourselves now is:
>> >
>> > "Do we want to maintain the project sponsorship program and setup a
>> > taxable subsidiary for it, or do we drop the project
>> sponsorship program
>> > completely?"
>> >
>> >
>> > I think the taxable subsidiary is manageable, but to justify
>> it, we'd
>> > need to put more efforts in the project sponsorship program
>> since at
>> > this time it is mostly dormant. (OpenLayers and GRASS are
>> interested but
>> > I've kept them on hold, and GDAL is... well, quiet)
>> >
>> >
>>
>> --
>> Jachym Cepicky
>> Help Service - Remote Sensing s.r.o.
>> jachym.cepicky at gmail.com <mailto:jachym.cepicky at gmail.com>
>> HS-RS: jachym at hsrs.cz <mailto:jachym at hsrs.cz> http://bnhelp.cz
>> http://les-ejk.cz
>>
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