[Board] Tax Implications of FOSS4G - Again

Sun Jul 21 05:22:09 PDT 2013

Hi Steve, (CC: OSGeo Board)

Moving this thread to the board list (originally on Conf list).

Can you please elaborate on this "project" thing that you mention? Is 
this something I should have taken care of as treasurer when we signed 
the contract? To be honest I don't remember any discussion about that, 
so it has obviously been overlooked.

I just reread the contract (linked from 
http://wiki.osgeo.org/wiki/FOSS4G_NA_2013_OSGeo_Agreements) and see this:

"""
However, both parties acknowledge that OSGeo intends to create a “FOSS4G 
NA Conference Committee Project” (“The Committee”), to which SG will 
assign a mutually agreed individual to serve as a volunteer “no cost” 
project lead.  As such, SG anticipates it will be able to extend tax 
exempt status to all donations given to The Committee under a 
“Pre-Approved Grant Relationship”, provided The Committee so applies to SG.
"""

When I read this clause initially, my understanding was that "The 
Committee" described above was your LOC which OSGeo has recognized by 
approving the budget, signing the contract and appointing a rep to it. I 
didn't realize that other steps were required or implied by this.

Is there something we should do about this now?

Daniel

On 13-07-14 10:02 AM, Steve Swazee wrote:
> "Advice that costs you nothing, is worth exactly what you paid for it."   So
> goes the saying.  With that thought in mind - my comments below:
>
> Like Robert, I do not claim to be a tax expert.  However, I do claim to be a
> thorough and meticulous reader of nonprofit tax code.  Enough so that I was
> able to have in hand an IRS tax exempt letter for SharedGeo in a little over
> two weeks after I filed the paperwork in 2009.  If you check around, you'll
> find out that's pretty much an unheard time frame (however, I will admit, it
> could have been "luck").
>
> Anyway, as previously offered, in the FOSS4G-NA 2013 contract between
> SharedGeo and OSGeo I wrote in a "project" clause which I believe would have
> done at least two things if it had been activated (here are some related
> links about nonprofit projects/fiscal sponsorship -
> http://charitylawyerblog.com/2010/09/17/fiscal-sponsorship-vs-fiscal-agency/
> , http://en.wikipedia.org/wiki/Fiscal_sponsorship):
>
> 1.) As accurately described by Robert below, it would have allowed "donors"
> to write off "contributions".  However, sales tax is a state function, so
> taxable items would have been exempt only to the extent SharedGeo was exempt
> from Minnesota State sales tax, which it is.
> 2.) More importantly, entering "project" status would have allowed all or
> some of the FOSS4G-NA 2013 event profits to be held in a FOSS4G-NA project
> "trust" account (without tax to OSGeo) to support the next FOSS4G-NA event.
> For example, the SharedGeo "Project Manager" - David Bitner - could have
> served as the fund custodian until that time when the funds were needed for
> startup of FOSS4G-NA 2015, or OSGeo achieved tax exempt status - at which
> time a nonprofit to nonprofit transfer could be executed.  Alternately, some
> or all of the funds potentially could have been "metered" out of the account
> back to OSGeo in a way that would have reduced tax impact of the inflow
> (e.g. we don't need the money right now, leave it there).
>
> Consequently, I take exception to the thought that there was no way to
> shelter FOSS4G-NA profit from taxes.  This issue did not bubble to the top
> in 2012 because the profit was small and it is my understanding that event
> facilitation was principally by OpenGeo vs. OSGeo.  However, the 50K from
> 2013 is the harbinger of what's coming and as long as OSGeo does not enjoy
> nonprofit status (I believe the 3rd filing is underway), I would suggest
> that tax planning needs to dialed into the calculus for these events.  And
> as demonstrated with the previously offered Washington and Portland
> examples, it's a point that expands nearly exponentially as event profits go
> up.
>
> Bottom line - in my opinion, OSGeo failing to have executed on that
> "project" entry clause for Minneapolis unfortunately leaves SharedGeo with
> no option on contract close out.  As accurately related below - ALL funds
> MUST now be assigned to OSGeo as taxable income.  Living in a state with a
> bunch of tight fisted Scandinavians - that makes me sad.  I watched the
> Minneapolis LOC slaving away to save dimes, only to now needlessly turn over
> dollars to the tax man.
>
> At least that is how I see the situation...FWIW.
>
> Cheers,
> Steve
>
>
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>     1. Re: Tax Implications of FOSS4G (Robert Cheetham)
>
>
> ----------------------------------------------------------------------
>
> Message: 1
> Date: Fri, 12 Jul 2013 18:15:15 -0400
> From: Robert Cheetham <cheetham at azavea.com>
> To: Dave McIlhagga <dmcilhagga at dmsolutions.ca>
> Cc: conference_dev at lists.osgeo.org
> Subject: Re: [OSGeo-Conf] Tax Implications of FOSS4G
> Message-ID:
> 	<CAGEj39nQEYa-aCJBB0woP-FUn=j+c4LdaegOb2Q9e7LiuBAY+A at mail.gmail.com>
> Content-Type: text/plain; charset="iso-8859-1"
>
> I am not a tax expert, but Azavea has worked with many non-profits and
> foundations over the years, including arrangements in which the non-profit
> is serving as a fiscal agent on a given project.  If OSGeo is not a
> non-profit, there is no way for another non-profit to extend its status to
> prevent payment of taxes by OSGeo.  I don't think Eclipse's status would be
> any different from Stumptown Syndicate or any other non-profit in this
> respect.
>
> The "extension of non-profit status" for the purposes of the event (the
> reference in the SharedGeo contract) would mean that the event could be
> operated without paying sales tax and any donations made to the event would
> be treated as donations to a non-profit organization (which would mean that
> they might be tax-deductible for the donor).  However, once the proceeds are
> transferred from the event organizer (the non-profit) to a for-profit entity
> (OSGeo), that for-profit entity would be liable for the tax liability
> related to this income, and it would be treated in the same manner as any
> other income it might receive.
>
> Best,
>
> Robert
>
>
>
> ------------------
> Robert Cheetham
>
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>
> On Fri, Jul 12, 2013 at 10:09 AM, Dave McIlhagga
> <dmcilhagga at dmsolutions.ca>wrote:
>
>> One would need a US Tax expert to weigh in to know the definitive
>> answer
>> -- but intuitively, it would seem impossible for a taxable
>> organization to take in revenue that results in profit for the
> organization as a whole.
>>
>> If there's another way - I'd suggest that's something OSGeo would need
>> to get it's own tax advice on, and establish as a basis for future events.
>> Otherwise, we're all just dealing with hearsay.
>>
>> Dave
>>
>>
>>
>> On 2013-07-12, at 10:03 AM, Jeroen Ticheler
>> <jeroen.ticheler at geocat.net>
>> wrote:
>>
>> Hi Kate,
>> Thanks! But what is the meaning of "extending the tax exempt status"
>> of e.g. the Eclipse Foundation? From your comment below this "umbrella
>> capability" becomes an empty shell if OSGeo in the end still requires
>> the tax payment on income.
>> Thanks,
>> Jeroen
>>
>> On 12 jul. 2013, at 15:56, Kate Chapman <kate at maploser.com> wrote:
>>
>> Hi Jeroen,
>>
>> Once a payment is made to OSGEO it would be income for the organization.
>> If perhaps OSGEO were to not get approved for tax exempt status in the
>> US they would then owe tax on it as income.
>>
>> Kate
>>
>>
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-- 
Daniel Morissette
http://www.mapgears.com/
Provider of Professional MapServer Support since 2000