Why the IRS is Targeting Open Source Software Groups

[a_p]

The real scandal here happened in 1959. When Congress passed created 501(c)(4)s, the law said that (emphasis is mine): "Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare".

In other words, 501(c)(4)s were intended to be allowed to spend NO MONEY on politics. However, a 1959 IRS regulation decided that "exclusively" (0%) really meant "primarily"(up to 49%), and in doing so they completely changed the spirit of law, which was not only illegal, but made the new law a nightmare difficult to enforce. Every single 501(c)(4) that has spent money on politics since 1959 has been in violation of the law passed by Congress — which means that the real law is almost guaranteed not to be enforced.

http://blogs.reuters.com/great-debate/2013/06/17/the-real-ir...

[jacques_chester]

As I understand it, the US method of interpretation of legislation is to take the opinions of government agencies more or less at face value. After all, they're the experts, so to speak. This is distinct from the Supreme Court's power to interpret the Constitution.

To me it seems like an abrogation of the independent role of the judicial arm. In Australia, for example, the courts jealously defend their rights and powers to interpret legislation to divine the intent of Parliament. Each government agency has no more standing or influence than anyone else.

IANAL, TINLA.

[mehmehshoe]

Here is a redacted form just stating that:

"Open Source Software

These organizations are requesting either 501(c)(3) or 501(c)(6) exemption in order to collaboratively develop new software. The members of these organizations are usually the for-profit business or for-profit support technicians of the software.

There is no specific guidance at this point. If you see a case, elevate it to your manager." http://democrats.waysandmeans.house.gov/sites/democrats.ways...

[ryanisinallofus]

If huge corporations are hiding parts of their operations under a 501c status it SHOULD be looked into. Don't fall into the trap that Tea Party members fell into. This is not a scandal. Don't cry about it.

No big deal.

[newbie12]

To be fair, in the case of the Tea Party they delayed applications through the election, and there's also evidence the IRS handed donor information to outside groups.

[pekk]

Strangely, "no big deal" is only the top post when it concerns open source. When it concerns the Tea Party, the top post is some political rant.

[adestefan]

People complain that government doesn't do a good enough job, but then people complain when government tries to do a better job.

[jpdoctor]

It's a bit bizarre honestly. Operations are all deductions, and so write off against revenue. Why would somebody take expenses off they P&L?

[malandrew]

I think a lot of things the government does would not be a big deal, if they at least told us about what they are doing and why.

Transparency goes a long long long way to resolve confusion and concern and prevent abuse.

[dllthomas]

But those of us trying to organize funds for FLOSS projects serving the public commons have a harder time raising money. That's a big deal. It's not really new info, though perhaps more confirmed - this is what people were telling us before even the Tea Party piece of this broke.

[TallGuyShort]

Neither this nor the original post seem to link to any additional information about which FOSS groups have been hit by this. Does anyone know?

[dasht]

Via huffingtonpost, here is a link to the IRS document which is the source of this report about "Open Source" firms being targeted.

What is released here is a "Be On the LOokout" (aka "BOLO") list - instructions to examiners. It talks not about specific companies but about criterea for evaluating applications for not-for-profit status. Regarding Open Source organizations, it notes that applicants may be the for-profit developers or for-profit support providers for the software. The advice given to examiners is to take it to their manager, since no more specific guidance is or was then yet available.

http://democrats.waysandmeans.house.gov/sites/democrats.ways...

[mlinksva]

CASH Music and Yorba have been mentioned publicly

http://faif.us/cast/2011/jul/05/0x13/ http://faif.us/cast/2011/nov/11/0x1C/

Link to first broken, see post/comments at http://web.archive.org/web/20110828144502/http://blog.cashmu...

[jbooth]

I wonder if this was an intended consequence of cutting IRS funding or whether those doing the cutting literally didn't think about it beyond "fuck'em!".

And now I'm wondering which scenario is more dissapointing.

[temphn]

Why is the response to incompetence to increase funding? Incompetent businesses go out of business, they don't get more money. Others could do this job better - assuming we even want the job being done. The US became one of the most powerful nations in the world without any IRS for its first hundred plus years, gaining most of its revenue through tariffs rather than taxes:

http://en.wikipedia.org/wiki/Tariffs_in_United_States_histor...

[joshuahedlund]

How is using resources to do something improper (targeting groups) a consequence of not having enough resources to do other more proper things?

Edit: OK, gotcha.

[mabhatter]

Take something as simple as Mozilla. Most of their work revolves around publishing the Firefox browser, they collect donations from Google for using Google's home page. After that it gets murky because there is another for-profit Mozilla in the background that makes its own deals for things like the Firefox Phone OS where "Free Spftware" isn't allowed. The IRS starts caring who gets what cut of those Goohle "donations"? Who owns the offices, pays the wages, and who owns the IP? It gets extra murky when an Open Source project get SOLD and more money starts changing hands... Suddenly a "non-profit" gets its assets sold for millions of dollars... The IRS wants its TAX moment cause they got to feed Uncle Sam.

I think the problem they have are 2 college kid companies that start as "open source" while they build something (and its true they eat Ramen the whole time) only to sell that for millions later. The ITS doesn't like giving away tax money if they don't have to.. Especially when they could have been collecting it all along ... Big companies know this and I'm sure "help" the IRS know which kids to go after.

[LaSombra]

Which is interesting since they use open source software.

[superuser2]

Tax-exempt status is a privilege created by Congress for which some FOSS groups don't happen to qualify, despite the organizations' beliefs that they do. "Targeting" is a misleading word here - the IRS isn't trying to shut these groups down, it's just paying more attention to whether or not they have to pay taxes like everyone else.