[Board] Questions from IRS vs our 501(c)(3) status
Cameron Shorter
cameron.shorter at gmail.com
Tue Nov 13 12:04:52 PST 2012
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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--
Cameron Shorter
Geospatial Solutions Manager
Tel: +61 (0)2 8570 5050
Mob: +61 (0)419 142 254
Think Globally, Fix Locally
Geospatial Solutions enhanced with Open Standards and Open Source
http://www.lisasoft.com
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