The problem here is that it could create a huge loophole. I'd love to be able to write off my donations to open source groups, but so would big companies.<p>Imagine a situation where a company that develops their software as open source, like reddit for example, setting up a 503(c) and putting all the developers and all the reddit gold revenue into the 503(c), thereby getting a massive write-off for the "donations" and not having to show profit on reddit gold.<p>Or worse, someone like IBM putting all their consultants into a 503(c) and taking all their consulting revenue as donations.
While the software itself may be free and open, often the authors of the software provide consulting & professional services around the implementation of the software. If the software in question has a primarily commercial purpose, I can see this conflict of interest confusing authorities.<p>Open Source is a widely used marketing and product strategy used to gain traction &market share and make substantial capital gains by the owners Github, MongoDB and many other start-ups.<p>It's not clear to me any of this is "non-profit" by default.
"Please explain how the activities of this organization differ from a commercial software development company beside distributing the software for free."<p>Please explain how the activities of your soup kitchen serving meals to the homeless differ from a commercial restaurant serving meals to the rich and famous of Beverly Hills beside distributing the food for free.
It isn't just open source. The whole US non-profit application process is needlessly long and difficult for anyone seeking it, which is generally, you know, the most benevolent people living amoungst us (like, for example, open source software developers). For years, the workaround on the delay has been to partner with a pre-existing non-profit.<p>In the meantime, if you want to start a for-profit company, why you can pick from one of a half dozen different varieties in any state in the nation by clicking on a few buttons on a website.<p>The only possible counter-argument to making it easy is worry about fraud. For every other reason, starting a non-profit should be easy, but if fraud's the big one, then for goodness sake, spend some money watching the non-profits.<p>The government should be, anyway, because most non-profits are doing works for the public good, you know- that stuff that the government used to fund? Maybe it could learn a thing or two? Maybe the government could pro-actively send them funding, instead of them having to wait and wonder whether a grant application will go through?
i wish they apply the same principles to the tax exempt status of churches - as, for example, distribution of entertainment media products for money done by a church has no substantial difference from that done by a [commercial] Hollywood studio.
First company I thought of when reading this was Famo.us. They are creating open source Javascript frameworks, but then want to sell hosting solutions that handle their stack (something along those lines).
Does this mean that if I currently work at a non-profit developing open source software--not our primary goal, just sharing tools we make--that I'm jeopardizing our 501(c)(3) status?
Though I don't know all the details I can see how the IRS could arrive to this conclusion. Otherwise any company could open source their in-house software (no matter in which state it is), then claim tax exemption.
The hair that's split is ours (free software) so we care, but we should probably be more concerned about the <i>5 year wait</i> to get a decision! That is unreasonable to the point of unworkable.
Just eliminate the IRS and income taxes, and this problem goes away. Move most government services, for which there is an actual market, to private for-profit or non-profit organizations, or voluntarily assembled communes or co-ops. Fund the rest of the government apparatus through usage fees where the government service is providing value that someone will pay for.<p>Does this expose a "free rider" problem? Yes. Is that important? No.