Why the IRS is Targeting Open Source Software Groups

http://www.motherjones.com/kevin-drum/2013/06/revealed-why-irs-targeting-open-source-software-groups

by talboito • 13 years ago

164 71 13 years ago

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• 13 years ago

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• 13 years ago

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...

LaSombra• 13 years ago

Which is interesting since they use open source software.

superuser2• 13 years ago

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.

pekk2• 13 years ago

"Targeting" was a misleading word with regard to the Tea Party groups, too. IRS wasn't trying to shut them down, it was just paying more attention to whether or not they have to pay taxes like everyone else (including groups with certain forms of political activity)

jbooth3• 13 years ago

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• 13 years ago

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...

jbooth3• 13 years ago

If funding was at one level, and you decrease it, and the backlog of undone case work increases afterwards, it points to a pretty simple conclusion.

I'm talking very specifically about administrative issues here, philosophical musing about the nature of taxation is besides my point (and more generally completely unhelpful when it comes to actually getting stuff done).

If people want to eliminate IRS case work by eliminating a bunch of these 501(c)(abcdewhatever) categories, that's fine by me. But the work exists and it needs to get done. The way you get it done is by people doing it, for salary.

As far as 'others could do this job better', you're suspicious of taxes and want to hand it off to a private contractor or something? I can't say that that makes sense to me.

ryanisinallofus4• 13 years ago

"without any IRS for its first hundred plus years"

And rivers caught on fire, slavery was rampant, women couldn't vote, children died in factories. Don't romanticize history.

The idea may work, it may not. It's certainly my favorite libertarian idea after ending the drug war. But don't "look back to the good old days" like they were better. They weren't.

dpeck• 13 years ago

The US really didn't have much to do on the world stage in its first 100 years. Separated from the rest of the "civilized" world by a few thousand miles of ocean in each direction it was able to be the biggest player in the western hemisphere, but the game was much smaller.

_delirium• 13 years ago

If you think of how private-sector companies manage their internal divisions, sometimes the answer to problems in a division is to increase funding. For example, if your products have major safety problems, it might be because your quality-control and risk-assessment groups are understaffed, and increasing the funding you allocate to that task, rather than decreasing it, might be a rational response.

joshuahedlund2• 13 years ago

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.

jbooth3• 13 years ago

Having a first-pass flag for keywords that correlate with skirting the edges of the law is actually completely proper. Not clearing them quickly enough if it turns out they're completely kosher is the problem here.

mehmehshoe• 13 years ago

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...

ryanisinallofus4• 13 years ago

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.

jpdoctor3• 13 years ago

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?

ghjm• 13 years ago

They want to be able to take large donations from wealthy contributors, without (a) having to pay tax on them as income, or (b) having to follow the normal reporting requirements for political groups.

adestefan2• 13 years ago

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

PencilAndPaper• 13 years ago

The key word being "tries". they need to be a bit more effective with their trying (if indeed they are trying to do good things).

sigzero• 13 years ago

"targeting" equals "tries" now? Okie dokie.

sliverstorm2• 13 years ago

Totally. Just earlier today I was reading something about how the IRS taxes citizens who have their wealth abroad. People were very angry! But these are the same people who want more taxes on the rich. All I could think was, 'Hold up a second guys, aren't you familiar with the key ways the rich avoid taxes?'

pekk2• 13 years ago

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.

malandrew• 13 years ago

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.

ryanisinallofus4• 13 years ago

Yeah, Obama seems to have promised more of that than he was able/willing to deliver.

newbie12• 13 years ago

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.

casual_slacker3• 13 years ago

If there "is evidence", you should provide it.

snowwrestler2• 13 years ago

in the case of the Tea Party they delayed applications through the election

Which shouldn't matter if they actually are social welfare organizations. If the election is that important to them, maybe they actually were hidden political orgs after all.

dllthomas• 13 years ago

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.

a_p• 13 years ago

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_chester3• 13 years ago

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.

danso• 13 years ago

Government agencies are part of the executive branch, though...so in a sense, their professional role is to execute the law. The judiciary at every level has the power to check that execution...a criminal judge can rule against the prosecutor's office, for example.

I guess I'm not getting what you're getting at? When the judiciary interprets the intent of a law, whose opinion besides the government agency do you think they should consider with equal influence? And if you're going to say, "the public"...well, I think that is the case in the U.S. too. So how are you gauging whether Australia's courts give fairer weight to the public than America's courts?

mabhatter• 13 years ago

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.

Why the IRS is Targeting Open Source Software Groups

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