That question shows the typical nerd-misunderstanding of law as a rule-based system with distinct outputs. They think the rule must be "no for-profit company can ever benefit from the work of the charity" and are pointing out how the rule is stupid so the rule must not exist.
IANAtaxL, in fact IANAL of any kind, but my reading is that the IRS doesn't want companies to set-up fig-leaf charities that absorb and hide their normal business functions.
And in fact, imagine a large software corporation that wishes to be able to tax-deduct the portion of its profits that go into R&D, so it sets up an open-source non-profit to do all of that, with leadership that may have a financial stake in the corporation or be otherwise leveraged, and donates its corporate profits to the non-profit for its operations. This is almost exactly the definition of a fig-leaf charity. Imagine if Google spun off an Android Foundation and sent all of its core OS developers there, or even more so if Apple spun off a Swift Foundation to make an open-source compiler - even though they would be creating open-source software that could be used by other companies, it would not be in the spirit of the law that defines 501(c)(3), and much of the benefit would be derived by the parent corporation. So as much as my knee-jerk reaction is to say "government doesn't understand software," as a taxpayer I think it's perfectly reasonable for the IRS to be wary and have the BOLO in place.
Am I the only one who doesn't have a problem with either of these Google/Apple examples?
If Apple or Google spun off a 503(c)(3) for Swift or Android how would that be a bad thing? It would ensure that the work of those developers stays open source and free to all. Even if it only applies to a particular platform it would still be open source and very useful for the world--if only to be able to see the code.
What the IRS needs is a few finer points of distinction... Let the FOSS development be tax-free as long as it's GPL or similarly licensed (the code must stay open no matter what) but deny such status for code that is BSD-like which may (easily) be used in a tax-circumvention mechanism; where some core code could be open source but to actually make it work you need the proprietary derivatives.
> If Apple or Google spun off a 503(c)(3) for Swift or Android how would that be a bad thing?
Presumably you mean a 501(c)(3) -- a not merely tax-exempt organization but one to which donations are tax-deductible as charitable donations; the problem here with one sponsored by a for-profit company, whether its developing open source software or not, is that they run the risk of being directed at the for-profit company's priorities, and being a way for money to be, in effect, funneled into the companies business in a tax-deductible manner from those with a stake in the company's returns.
> What the IRS needs is a few finer points of distinction... Let the FOSS development be tax-free as long as it's GPL or similarly licensed (the code must stay open no matter what) but deny such status for code that is BSD-like which may (easily) be used in a tax-circumvention mechanism
The copyleft vs. noncopyleft distinction really has no bearing on the central problem here. The real problem is that, to the extent that there is legitimate reason to more closely look at 501(c)(3) applications from entities focussed on OSS (perhaps because for-profit entities have been trying to set them up as ways to improve the tax status of development efforts when they have an OSS-centric business model), this particular case doesn't seem to be one that should have been problematic -- not because of license terms, but because the potential problems that such scrutiny is designed to avoid aren't present. But that may just be a poor first-level decision or a result of poor application crafting, and not any real indication of any problem with the general policy.
As a concrete example for the copyleft distinction, consider if Swift Foundation was founded to create copyleft (let's say GPL or even AGPL) compilers, but the system libraries every compiled program would need to link to were only found on Apple products. It's very clear that this would be a move that would be for the benefit of Apple's bottom line, and that it was a technology originally developed by Apple employees. So it's not like some random guy in his garage said "I will make something charitable but make the independent decision to base it on Apple hardware," as is true of (say) an iPhone app for detecting medical problems, which would indeed be 501(c)(3) eligible in my book (IANAL).
Maybe I am a little confused, but what you described sounds like how Mozilla Corp.(for profit) and Mozilla Foundation(nonprofit and tax exempt, which owns the Corp as a subsidiary) are organized.
You're definitely confused. Mozilla is the reverse of the described scenario. If Mozilla corp owned the non-profit, rather than how it currently is, then it would fit.
Right, and if the BOLO actually functions like the name implies ("be on the look out for these, give them extra attention and watch out for abuse") that's probably appropriate. If, in practice, it means "kill these so you don't have to justify your approval to your superiors", that's not okay. My understanding, second and third hand from those who have tried getting approval for various things, is that it is too much the latter.
IANAtaxL, in fact IANAL of any kind, but my reading is that the IRS doesn't want companies to set-up fig-leaf charities that absorb and hide their normal business functions.