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Why the IRS is Targeting Open Source Software Groups

164 points by talboito 13y ago

TallGuyShort 13y 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 13y 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.waysandmeans.house.gov/files/November%202010%20BOLO%20IRS0000001349-IRS0000001364.pdf http://democrats.waysandmeans.house.gov/sites/democrats.ways...
- mlinksva 13y ago
  CASH Music and Yorba have been mentioned publicly http://faif.us/cast/2011/jul/05/0x13/ http://faif.us/cast/2011/jul/05/0x13/ http://faif.us/cast/2011/nov/11/0x1C/ http://faif.us/cast/2011/nov/11/0x1C/ Link to first broken, see post/comments at http://web.archive.org/web/20110828144502/http://blog.cashmusic.org/2011/06/23/the-tough-road-to-501c3-status-for-open-source/ http://web.archive.org/web/20110828144502/http://blog.cashmu...
LaSombra 13y ago
Which is interesting since they use open source software.
- superuser2 13y 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.
  - pekk 13y 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)
jbooth 13y 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 13y 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_history http://en.wikipedia.org/wiki/Tariffs_in_United_States_histor...
  - jbooth 13y 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.
  - ryanisinallofus 13y 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.
    - 13y ago
mehmehshoe 13y 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.waysandmeans.house.gov/files/November%202010%20BOLO%20IRS0000001349-IRS0000001364.pdf#page=13 http://democrats.waysandmeans.house.gov/sites/democrats.ways...
ryanisinallofus 13y 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.
- adestefan 13y 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 13y 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 13y ago
    "targeting" equals "tries" now? Okie dokie.
  - sliverstorm 13y 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?'
    - snogglethorpe 13y ago
      The thing is, the IRS "taxes citizens who have their wealth abroad" even if they have no significant financial/business links with the U.S. (they live/work/invest entirely outside the U.S.), and even if they aren't wealthy... I'm all for catching tax cheats when that's actually what's going on, but the IRS policies here are often just downright douchey...
    - untog 13y ago
a_p 13y 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-irs-scandal/ http://blogs.reuters.com/great-debate/2013/06/17/the-real-ir...
- jacques_chester 13y 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 13y 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 13y 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.

164 points by talboito 13y 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 13y 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.waysandmeans.house.gov/files/November%202010%20BOLO%20IRS0000001349-IRS0000001364.pdf http://democrats.waysandmeans.house.gov/sites/democrats.ways...
mlinksva 13y ago
CASH Music and Yorba have been mentioned publicly http://faif.us/cast/2011/jul/05/0x13/ http://faif.us/cast/2011/jul/05/0x13/ http://faif.us/cast/2011/nov/11/0x1C/ http://faif.us/cast/2011/nov/11/0x1C/ Link to first broken, see post/comments at http://web.archive.org/web/20110828144502/http://blog.cashmusic.org/2011/06/23/the-tough-road-to-501c3-status-for-open-source/ http://web.archive.org/web/20110828144502/http://blog.cashmu...

LaSombra 13y ago

Which is interesting since they use open source software.

superuser2 13y 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.
- pekk 13y 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)

jbooth 13y 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 13y 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_history http://en.wikipedia.org/wiki/Tariffs_in_United_States_histor...
- jbooth 13y 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.
- ryanisinallofus 13y 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.
  - 13y ago

mehmehshoe 13y 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.waysandmeans.house.gov/files/November%202010%20BOLO%20IRS0000001349-IRS0000001364.pdf#page=13 http://democrats.waysandmeans.house.gov/sites/democrats.ways...

ryanisinallofus 13y 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.

adestefan 13y 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 13y 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 13y ago
  "targeting" equals "tries" now? Okie dokie.
- sliverstorm 13y 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?'
  - snogglethorpe 13y ago
    The thing is, the IRS "taxes citizens who have their wealth abroad" even if they have no significant financial/business links with the U.S. (they live/work/invest entirely outside the U.S.), and even if they aren't wealthy... I'm all for catching tax cheats when that's actually what's going on, but the IRS policies here are often just downright douchey...
  - untog 13y ago

a_p 13y 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-irs-scandal/ http://blogs.reuters.com/great-debate/2013/06/17/the-real-ir...

jacques_chester 13y 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 13y 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 13y 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.