[Board] Questions from IRS vs our 501(c)(3) status

[Seven]

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Folks,
my take on this blew up while writing (as usual) so I thought to
better put it aside in a blog and not clog up this list:
http://arnulf.us/sevendipity/archives/56-Go-OSGeo,-go!.html

I like the way things are evolving, this is a good Board of Directors.
Head on.

Cheers,
Arnulf

Am 2012-11-13 08:14, schrieb Jachym Cepicky:
> 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)
>> 
>> 
> 
> 
> 
> _______________________________________________ Board mailing list 
> Board at lists.osgeo.org 
> http://lists.osgeo.org/mailman/listinfo/board
> 


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