Forum OpenACS Q&A: Re: Setting up an OpenACS Foundation

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Posted by Torben Brosten on
Setting up a nonprofit in the US could result in increased risks, such as vulnerability to attack by for-profit companies that compete in the same market --markets are economic warfare afterall.

In the US, the tax law states that any nonprofit that operates (ie competes) in for-profit markets may be taxed. When a nonprofit is subject to taxation, it cannot claim expenses on items that are not directly related to the for-profit operations (overhead, marketing etc), whereas for-profit companies can. The result is that a non-profit organizaiton can end up paying much more in taxes than a for-profit company.  The worse part, I believe, is that much of this is subject to the interpretation of government tax agents, ie there *would* be additional legal representation costs to support an alternate view.

In this pro-corporate climate[1], a US non-profit is not suitable for openacs endeavors. By its tax-exempt definition, it could not work with any for-profit company or have its tools compete where significant revenue is at stake .

1. http://www.irs.gov/pub/irs-drop/rr-04-51.pdf

Consider starting a nonprofit where open source projects have been historically welcomed by regulatory bodies such as governments. Or.. consider creating a new kind of triple-point socially responsible for-profit venture.

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Posted by Jeff Davis on
...a US non-profit is not suitable for openacs endeavors. By its tax-exempt definition, it could not work with any for-profit company or have its tools compete where significant revenue is at stake .
I think that is pretty clearly false. There are things that we (the community) want to do that would not be permissible within a non-profit but we are not going to try to do them within a non-profit. There are clearly quite a few things that we can do with a non-profit we could not otherwise do and I think those things have a value that exceeds the risk and costs associated with establishing a foundation. You also seem to have gotten the idea that setting up a foundation somehow changes the legal status of the code -- it does not, and any individuals or companies doing paid work involving OpenACS code can continue to do so with no consequence or additional risk.

It might be useful to consider the justifications arrived at by other open-source projects. Here is what they say in the ASF FAQ:

Why was the Apache Software Foundation created?
The Foundation was formed primarily to
  1. provide a foundation for open, collaborative software development projects by supplying hardware, communication, and business infrastructure;
  2. create an independent legal entity to which companies and individuals can donate resources and be assured that those resources will be used for the public benefit;
  3. provide a means for individual volunteers to be sheltered from legal suits directed at the Foundation's projects; and,
  4. protect the 'Apache' brand, as applied to its software products, from being abused by other organizations.
Here is what the Plone foundation FAQ says:
Why does The Plone Project need a Foundation?
Plone is reaching critical mass, with enterprise implementations and worldwide usage. The Foundation will be able to speak for Plone, and provide strong and consistent advocacy for both the project and the community. The Plone Foundation will also help ensure a level playing field, to preserve what is good about Plone as new participants arrive.

You could look for similiar statements from the Mozilla foundation, the Jabber Software Foundation, the Software in the Public Interest (umbrella for debian), the Python Software Foundation, the FSF, and many more.

I think it's quite telling that it is hard to find a well established open source project without an affiliated foundation. You can get all tinfoil hat about the US legal environment but the truth is, that's all the more reason to have a foundation. It *is* a corporation and can mitigate the kinds of risk you allude to with your comment about "attack[s] by for-profit companies".

As for setting up in a different country, yeah, that might be useful as well, but since no one is volunteering to pay for it, it's not going to happen near term.