[OSGeo-Conf] Tax Implications of FOSS4G - Again

Sun Jul 14 09:56:37 PDT 2013

Steve,

I was not part of the list through the entire conversation, and I think I
might have missed the part about holding the funds in a trust account for
use by another non-profit in the future.  In this scenario, I agree that if
the funds are never disbursed to OSGeo, then one could be potentially avoid
taxes, provided that OSGeo does not have control of the funds and they are
turned over to another non-profit to manage the next event.  This is a
subtlety, however, that one would need to discuss with an accountant to
make sure it would pass muster.

Robert

------------------
Robert Cheetham

Azavea  |  340 N 12th St, Ste 402, Philadelphia, PA
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On Sun, Jul 14, 2013 at 10:02 AM, Steve Swazee <sdswazee at sharedgeo.org>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
>
>
> -----Original Message-----
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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
>
> Azavea  |  340 N 12th St, Ste 402, Philadelphia, PA cheetham at azavea.com | T
> 215.701.7713  | F 215.925.2663 Web azavea.com <http://www.azavea.com/>  |
> Blog azavea.com/blogs  | Twitter @ <http://goog_858212415>rcheetham
> <http://twitter.com/rcheetham> and @azavea <http://twitter.com/azavea>
>
> *Azavea is a B Corporation <http://www.bcorporation.net/what-are-b-corps>
> -
> we apply geospatial technology to create better communities * *while
> advancing the state-of-the-art through research. Join us in creating a
> better world.*
>
>
>
> 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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> >
> >
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