Forum OpenACS Q&A: Re: Setting up an OpenACS Foundation
First, I realize my previous message was terse. I am sorry for that. I should have waited until I could give it my full attention, but alas, I was heading out the door and just had to opine! =)
1. a tax-exempt nonprofit *is* at risk of Unrelated Business Income Tax (UBIT) if it engages in "substantial" for-profit activity. IRS determination is largely on a case by case basis ie. subject to irs agent interpretation. The nonprofit is responsible for UBIT.
2. An IRS auditer may not be knowledgeable about open source, thereby viewing nonprofit's behavior as UB if the nonprofit agents include commercial entities and/or their agents.
3. UBIT can be much more than for-profit corporations pay in taxes without putting out the effort to maintain tax-exempt status, because nonprofits cannot declare expenses that are not directly attributable to the UB activity.
4. Cost of fighting a UBIT determination could be expensive.
5. the statement "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." is consistent with "..a US non-profit is not suitable for [all] openacs endeavors".
6. "There are clearly quite a few things that we can do with a non-profit we could not otherwise do" is also consistent.
7. Setting up a foundation does not change the legal status of the code.
8. You write:
"it's quite telling that it is hard to find a well established open source project without an affiliated foundation".
Not really.. aolserver is opensource code managed by for-profit AOL. tcl/tk is managed by forprofit activestate (with some copyright held by a nonprofit university). I believe postgresql, inc holds the tm and manages postgres via the The PostgreSQL Global Development Group (project). Let's not forget arsdigita's ACS is now Redhat's CMS.
9. You write:
"a foundation.. *is* a corporation and can mitigate the kinds of risk you allude to with your comment about 'attack[s] by for-profit companies'"
I'm not discussing personal risk. I mean risk to the resources of the foundation not being disbursed as intended. A nonexistant foundation does not create risk. Noone wants to see others' hardwork and dontations in jeopardy. A nonprofit does not have the horizontal market flexibility to compete against something like WebCT without risking UBIT activity. Also, UBIT investigations can be triggered for instance, when an agent from a for-profit company contacts the IRS about a potential UB activity by the foundation..
Consider also that developers who find themselves working under the foundation's umbrella might be restricted from contracting work from commercial entities because of the potential IRS perception that the agent's work might be UB.
Why not leave the openacs project as an informal collaborative venture (of multiple targets), and create a foundation that becomes a collaborative entity among many others?
You also say the risks you are worried about are "...the resources of the foundation not being disbursed as intended." I would argue that absent a foundation those resources wouldn't exist at all, the funds the foundation end up getting it will get by virtue of being a non-profit and without a suitable non-profit vehicle a lot of those funds are not accessible to us.
Consider also that developers who find themselves working under the foundation's umbrella might be restricted from contracting work from commercial entities because of the potential IRS perception that the agent's work might be UB.Restricted how? by a contract the developer signed with the foundation? I don't think for a contractor such a clause would be either present or required, and if by some fluke there was such a clause, then anyone who did not want to obligate themselves to working under that restriction could decline the job.
Why not leave the openacs project as an informal collaborative venture (of multiple targets), and create a foundation that becomes a collaborative entity among many others?That is exactly the plan, there is no intent for the foundation to subsume the OpenACS project or alter it's governance. It's intended to be a tool to facilitate certain aspects of the project that are difficult to manage absent a corporatate sponsor.
Think of the things around OpenACS ownership. Right now, the server is owned by furfly (or maybe "the community" but that is meaningless), the domain name by Ben Adida, and there has been no trademark registration.
I think it's a great thing that individuals have been willing to act as stewards for the community for such things but I think no *one* person should own those things. I would be much happier if the foundation owned the domain name, the physical hardware, and the trademark since it's the only way I can see to say "the community" owns them.
Can you give a cite or a source where UBIT was imposed on an open-source project?
I have been running Linux since about 1994 and have been following open source since then as well, and have never heard of an open source project getting hit with UBIT.
