X.Org Foundation Loses 501(c)3 Non-Profit Status 208
An anonymous reader writes "The X.Org Foundation, which drives the X.Org Server projects, Mesa, and Wayland open-source programs, had its tax-exempt status revoked by the IRS. It turns out the X.Org Foundation had put in quite a lot of work to become a non-profit organization, with guidance from the Software Freedom Law Center. They got in trouble after failing to routinely file their taxes on time. There's also been a host of other X.Org accounting errors in recent years. There was also the recent news of the IRS going after open-source projects, too."
Re:that crazy old IRS (Score:4, Informative)
OK, I understand people don't like to TRFA, but did you not even RTF summary? What tricks? The "trick" of revoking tax exempt status for orgs that fail to properly file the required paperwork?
Re:Failing to file taxes? (Score:5, Informative)
what this means (Score:5, Informative)
OK the article should have said what this means and didn't. The IRS reinstates 501c3 status pretty easily once you clean up your paperwork. You can apply for retroactive reinstatement but that requires a good explanation of why they didn't file, and if X.org's reason is some variant of "we forgot" that won't cut it. This means they are liable for corporate income taxes but I'm sure their expenses easily kill any income. The big problem is often state taxes apply during the period where they are off the 501c3 rolls. But here they might be able to do OK on an appeal.
My guess is that this is not going to be too expensive but it will be annoying.
Fuck off (Score:3, Informative)
They didn't file their taxes. It has nothing to do with politics.
Re:No one to blame but themselves (Score:5, Informative)
Yeah, no sympathy here. I sit on the board of a local historic preservation society, and we're 501c3. We pay our accountant something like $1000/year (some of her rate is counted as an in-kind donation, but nothing we do is really that complicated) and she keeps the paperwork current and straightened out. I'm relatively sure that X.org runs with a bigger budget than we do and could find accounting services, so this is just gross incompetence on their part.
Re:X.org forfeits agreement. IRS does job. News at (Score:5, Informative)
X.org is not a company. It is is a group of volunteers, either individuals or corporate employees begin donated by their employers. The group writes and maintains the Xserver which is in use on almost every Linux desktop and many embedded systems. This code is given away for free to benefit all who use Linux.
If that doesn't qualify as a 501(c)3 I don't know what would qualify. The group has no revenue, they rely on donations to function and everything they make is given away for free -- to anyone who asks with no restrictions other than some minor licensing terms. And the licensing terms are really minor, like give proper attribution to the authors of the code. The benefit from being a 501(c)3 does not accrue to X.org, the tax benefits goes to the companies donating to the organization since those donations are now tax deductible. Hopefully that means X.org will get more donations.
I do agree that a few companies seem to be abusing 501(c)3 and open source. Those companies are making captive open source projects which basically only benefit themselves. But that's more of a marketing gimmick than a tax avoidance one. The resources being given to the captive 501(c)3 were deductible to the parent corporation anyway. So if the IRS dissolves these captive 501(c)3s they aren't going to get any more revenue. They'll just move where the deductions are being taken.
Re:No one to blame but themselves (Score:4, Informative)
No really a couple thousand a year would likely cover it. They are not that huge an organization.
But the NFL is Non-profit (Score:5, Informative)
Re:First they came for the Tea Party (Score:2, Informative)
Except, really, they didn't. [salon.com] They "came for" -- i.e., put on their "be on the lookout" list -- several different classes of non-profits, including "Open Source", "Occupy", "Free Palestine", and "Tea Party" groups, all at the same time. No "first they came for" about it.
But since Tea Party groups were essentially created by Fox "News", you heard a hell of a lot about that. Not so much about Palestinian rights groups having the exact same problem.
Re:No one to blame but themselves (Score:5, Informative)
> software folks if working with money of sufficient amounts should hire an accountant.
They have one, but he apparently didn't do his job. FTFA:
Stuart Kreitman, the X.Org Foundation accountant and Oracle employee, wrote during the Board of Directors' IRC meeting this week, "The status of the 501c3 is lost because we (me) failed to file the 3 past years' tax returns on time. Note that we've Never filed returns since our first re-organization to the LLC in 2005. I was taken by surprize that the IRS hit us so rudely. I've had little issues with my own returns and have always found them to be reasonable and friendly."
Re:But the NFL is Non-profit (Score:4, Informative)
The NFL is not a good example. In 1966 it was explicitly allowed to file as a 501c6. That's black letter law, not the enforcement of a regulation. Congress not the IRS is who you should be complaining to.
Re:No one to blame but themselves (Score:5, Informative)
Here's the "ridiculously complex" terms they're expected to comply with:
1) File a Form 990 on time each year.
I'm guessing that X.org would be eligible for a 990-N (< $50,000 gross receipts each year), also known as an 'e-Postcard,' because it can be filed online. Here's the ridiculously complex information [irs.gov] required on a Form 990-N:
If by some stroke of fundraising genius, they managed to take in more than $50,000, they'd need to file a 990 or 990-EZ (EZ can be filed as long as < 200,000 per year is collected). The EZ is 3 pages, and looks pretty much like a standard Federal 1040-EZ, just with questions related to income sources for the foundation, instead of an individual.
Some tax laws are stupidly complex. These rules aren't, nor are they particularly burdensome to comply with.