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

Wed Nov 14 01:22:38 PST 2012

Sure, no problem. Actually a good old friend scathed me for not
sending it here in the first place because he felt this is like being
big headed and weasly. My intention was quite the other way round -
but hey, I got used to doing it all wrong all the time. :-) Here goes:

> On 13/11/2012 10:22 PM, Seven wrote: 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

This is a verbatim copy for archiving reasons:

Tuesday, November 13. 2012
Go OSGeo, go!

Originally this was a mail to a mailing list but then it blew up in my
mind and instead I made it a blog. Not sure whether this is a good
idea because people usually do not respond to blogs (not mine anyway)
and I would very much want a dialog to ensue. But how? Yes, probably I
should've sent it to the mailing list and see what happens...

Folks,
I pondered this message thread for some time. Especially the "spinning
our wheels and not getting anywhere" bit got me thinking. I don't
think that we are not getting anywhere, it is just a hard process but
one we must go through. No accountant or consultant can tell us what
to do. It is the old hammer and nail problem: If you only have a
hammer all your problems look like a nail. In my opinion OSGeo should
neither be nailed nor screwed. Ha.  What are we? Glue? When you would
have told Henry Ford that he should glue the fenders to his cars he
would have declared us crazy. Well, would he? Now everybody does it.

We are not into the accounting business but run a foundation in a
brand new way of doing things, globally. I honestly believe we cannot
overestimate the potential this has. Think lateral. Allow your mind to
twist a bit.

So in practice my take on this is that "OSGeo global" should not
budget for 12k a year to be a US based 501c(3) or (6) given that the
only benefit we get out of it is a foundation with reduced scope,
limited to the US (taxation) and only relevant to a subset of
projects. This is simple to compute: How much are we receiving through
the project sponsorship minus how much will it cost us. Look at the
number and decide whether it make sense or not. My gut feeling is that
we can easily neglect this. It is a no-brainer, is it not?

But if the US (chapter? where? who?) wants to run with it, perfectly
fine. But don't touch the "main" foundation, umbrella thingy.

If it must be the incorporated OSGeo then I would suggest to make the
existing OSGeo a US national thing and then superimpose what OSGeo
represents globally as another instance that is incorporated nowhere.
There is as yet no such thing as global incorporation! At max one can
be a multinational. We might consider asking the UN to lend a helping
hand. Don't laugh, this is not so far off. Even they struggle to be a
really global representation.

This scenario would reflect the set up we already have in place in
many existing Local Chapters. They are incorporated in the way their
legal systems makes them obey to, that have income or not, are
charitable or not, and so on. We just don't yet have something
comparable in the US yet. The existing incorporated (US based) OSGeo
is sort of "in the way" and this is starting to fire back financially
and legally (and also did community-wise several times).

Increasingly I don't see any reason for OSGeo (global) being
incorporated anywhere at all. If it were on GitHub, I'd fork it and
release it to the public domain. Any founding and Charter Member
should probably have the right to do that? What do you think? Think
different.

For the time being I suggest that Daniel stays the main point of
contact for OSGeo's global expenses (sorry Daniel, I know it is a pain
and I very much appreciate that you have taken this on!). At the same
time We All (represented by the board) have to (must) go through all
of the tedious and boring questions to come to conclusions and then
act on them.

This is simply because we are the only ones who have an idea of what
OSGeo can be. There is not a single accountant, consultant or god who
can do that job for us. We are inventing a new way of organization. I
should say: We have the *chance* to do that. We can also set OSGeo
back and make it a more standard business like Eclipse or the OGC but
is that really what we want? We already have a foot in the door with
Eclipse, OGC and others. Why try to be like them, it will only end in
competition and playing by established rules.

Over time we might want to reduce all expenditure of OSGeo "global" to
a minimum and run all expenses exclusively through the local chapters.
Those who can, pay. (or run their own servers like FOSSGIS does for
some years now). The more I think about this the more sense it makes.

One thing that we seem to need really soon is a US based taxable
branch of OSGeo - to take on the things that so far OpenGeo have
graciously done for us around FOSS4G NA et. al.

Have fun!

[EOF]

Cheers,
Arnulf

> 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
>>>> 
> 
> -- http://arnulf.us Exploring Space, Time and Mind
>> _______________________________________________ Board mailing
>> list Board at lists.osgeo.org 
>> http://lists.osgeo.org/mailman/listinfo/board
> 
> 

- -- 
http://arnulf.us
Exploring Space, Time and Mind
-----BEGIN PGP SIGNATURE-----
Version: GnuPG/MacGPG2 v2.0.18 (Darwin)
Comment: GPGTools - http://gpgtools.org
Comment: Using GnuPG with Mozilla - http://www.enigmail.net/

iEYEARECAAYFAlCjYt4ACgkQXmFKW+BJ1b30sQCfRTACxFQAvmRUnkxEZA8lWrz9
3pMAnic2z+XeGubkj+LIe1jpiQyvJ2DJ
=68Hv
-----END PGP SIGNATURE-----