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

[Frank Warmerdam]

Daniel,

On preliminary review my impression is that the IRS's view of acceptable
activities for an education focused OSGeo is not going to be compatible
with our broader mission.  I am concerned that setting up a "for
profit" subsidiary is going to result in substantial additional legal and
accounting complexity - quite possibly exceeding the value to us.

It would be helpful to have some sense of:
 - the cost/complexity of setting up a "for profit" subsiduary.
 - the practicality and implications of us opting instead of 501(c)6
status.
 - 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)

Note that the board has budgeted resources for legal and accounting support
and you should not hesitate to draw on professional support as needed.

Failing to achieve 501(c)3 status, I am also wondering if it might make
sense to consider some affiliation with an existing fiscal sponsor
organization like SPI (Software in the Public Interest) should we want to
be able to accept charitable contributions.  That doesn't need to be dealt
with now, but I do want to stress there may be alternate approaches to
having 501(c)3 status for narrow activities.

I couldn't help but noted that the optimistically described "advice and
suggestions" was somewhat light on broad advice and suggestions.

I greatly appreciate your work on this activity and the broader Treasurer
role.  In truth you would not have to do so much "digging out" if I hadn't
been so slack in my time in the role.

Best regards,
Frank

On Tue, Oct 30, 2012 at 9:09 AM, Daniel Morissette <dmorissette at mapgears.com
> wrote:

> Board,
>
> Earlier in September, we received some news from a new IRS agent about our
> application for 501(c)(3) status. The agent spoke to David Atkin, our
> attorney who worked on IRS stuff with Tyler in the past, and then we
> received a list of questions to answer from the IRS [1].
>
> I also spoke to our attorney in the days that followed, and yesterday I
> received a written copy of his advice and suggestions, see [2].
>
> To make a long story short, it seems that the IRS recognizes our
> educational mission and would be willing to grant 501(c)(3) status for our
> educational activities, but they do not consider that supporting software
> development qualifies by itself (unless it's solely for education), so
> things like the project sponsorship program would need to be moved to a
> for-profit subsidiary. There are also some bugs with the way some things
> are handled with respect to FOSS4G that would need adjustment.
>
> To be honest I'm not too excited by the idea of a for-profit subsidiary
> and am not even sure if that would make any sense in our case (who would
> own it anyway?). In my first exchange with David I thought (misunderstood?)
> that it might have been the charitable aspect that was the problem and that
> going with 501(c)(6) as some people suggested in the past might do, but
> this is not what David's written notes (received yesterday) suggest.
>
> I am planning a call tomorrow (Wednesday) with David's assistant to
> discuss our options. I would love to hear your feelings until then.
>
> Perhaps we could setup a task force with a couple of US-based board
> members (or other members with experience) to work on our response which is
> due by mid-November (we requested and got an extension).
>
> Daniel
>
>
> [1] http://svn.osgeo.org/osgeo/**board/irs_docs/OSGeo-IRS-**
> Letter-20120914.pdf<http://svn.osgeo.org/osgeo/board/irs_docs/OSGeo-IRS-Letter-20120914.pdf>
> [2] http://svn.osgeo.org/osgeo/**board/irs_docs/OSGeo-IRS-**
> attorney-advice-and-**suggestions-20121029.pdf<http://svn.osgeo.org/osgeo/board/irs_docs/OSGeo-IRS-attorney-advice-and-suggestions-20121029.pdf>
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>



-- 
---------------------------------------+--------------------------------------
I set the clouds in motion - turn up   | Frank Warmerdam,
warmerdam at pobox.com
light and sound - activate the windows | http://pobox.com/~warmerdam
and watch the world go round - Rush    | Geospatial Software Developer
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