[pdabbadabba]

This is exactly on-point, and bears repeating: simply not seeking to make a profit does not make an organization eligible for 501(c)(3) status. The organization must have an exempt purpose, one that is "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals."

Charitable, in turn, has its own specific meaning: it includes "relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency."

See http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organi...

In light of these requirements, and poking around the Yorba website, I'm not shocked that Yorba was denied. Though it may claim to be a "charitable, scientific, and educational" organization, it certainly looks to me like its purpose is to make free software. It does not exist to educate people, it does not exist to further a field of scientific study, and it does not appear intended to do any of the things covered by "charitable purposes." It may do some of these things incidentally (education, in particular) but that won't cut it. Ars's argument that open-source software has educational value misses the point: education has to be the purpose of the organization, not simply a benefit that flows from the organization's work.

And the IRS's concern is not just that corporations might indirectly benefit from the work of non-profits (though that seems to . The IRS is also concerned about corporations intentionally spinning off projects for the purpose of sheltering some of their activities from taxation.

[virtue3]

They tried to make the actual points. But they got shot down pretty hard. The real issue seems to be that providing the work without illustrating and tracking who uses the software (so that you're being charitable and helping the less fortunate) means you aren't being charitable...

http://blogs.gnome.org/jnelson/2014/06/30/the-new-501c3-and-...

Personally, they're one of the places I interviewed at right out of college (I got wrecked pretty hard as they were my first ever whiteboard test haha). They're driven and they firmly believe in trying to help people with free software. It's a real shame they got denied.

[pdabbadabba]

Yeah, I wish they hadn't been denied as well, particularly given that it probably would have been possible for them to get it if they were really committed. But they would really need to retool their website and other materials (and, if necessary, their actual organizational mission) to communicate the fact that they have some goal other than just making free software. As you say, this could have included taking some concrete steps to ensure that their software benefitted the poor.

[shard972]

> The real issue seems to be that providing the work without illustrating and tracking who uses the software (so that you're being charitable and helping the less fortunate) means you aren't being charitable...

Seems like a pretty shitty reason to deny a possible open source company non-profit status on the grounds they aren't tracking their users.....

[dnautics]

The IRS is also concerned about corporations intentionally spinning off projects for the purpose of sheltering some of their activities from taxation.

What red flags you normally for things like that is explicit connections to the for-profit (shared officers, board members, highly paid employees, etc.)

[orlp]

I'd say that open source qualifies as a public work.

[quadrangle]

Indeed, while many concerns about Yorba are valid, the IRS claim that FLOSS is not "public work" is troubling and nonsensical. Yorba is not a charity, and not all public work deserves 501(c)(3) status, but FLOSS is public work.

[pdabbadabba]

Yeah, the IRS's letter is incomprehensible on this point. Maybe I can help: at it is typically understood, a "public work" is something like a dam, or bridge, or sewer system. As Black's Law Dictionary defines the term, public works are "structures (such as roads or dams) built by the government for public use and paid for by public funds."

It is impossible to know whether this is what the IRS had in mind. But I can tell you that, according to my understanding of the term, and the dictionary definition, it seems pretty clear that it does not cover open source software.

[cscurmudgeon]

> maintaining public buildings, monuments, or works

I'd say Yorba falls under that if you take "works" to include digital artifacts.

[chc]

I think "works" can include digital artifacts — to my understanding, this was part of the Mozilla Foundation's rationale for exemption. But Mozilla's "public work" was the Internet as a free platform, not just some piece of software used by some unidentified group of people. Mozilla compared the Internet to a public road, and depicted its role in maintaining the Web as a free and open platform as being similar to ensuring that roads are well-kept and accessible to everyone.

Yorba's application appears to have been more along the lines of, "We make free software. Poor people can use free software and other programmers can learn from it." (I'm basing this on the IRS's response — I can't find a full copy of Yorba's application anywhere.) So I can kind of see why that appears less compelling from a "public works" perspective to the IRS.

[floil]

The IRS contends otherwise; from http://yorba.org/docs/IRS-determination-letter-final.pdf, page 8:

> Software is not a public work. The development and distribution of software is not a public work even if published under open source or creative commons compatible licenses because software is not a facility ordinarily charitable to include "erecting or maintaining public buildings, monuments, or works." This language slightly broadens the original formulation from four centuries ago.

It goes on to quote the Charitable Uses Act of 1601.

[pdabbadabba]

Sure, if "maintaining a work" counted, the standard would be pretty easy to meet!

But it's not just "works" but "public works." As in, "a broad category of infrastructure projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community." http://en.wikipedia.org/wiki/Public_works (Yes, it's Wikipedia, but this definition is about right.)

[cscurmudgeon]

Isn't free open source a public work? It seems to meet the criteria as almost everyone has a computer...

[npizzolato]

It seems like "financed and constructed by the government" is a pretty important clause in that definition.

[cscurmudgeon]

It is a clause in the Wikipedia definition of what constitutes public works. Does the IRS use the Wikipedia definition?

http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organi...

[pdabbadabba]

Can't immediately find any IRS documents defining the term, but here is the definition from Black's Law Dictionary:

> Structures (such as roads or dams) built by the government for public use and paid for by public funds.

There is also a maxim of statutory interpretation in law that a word it known by its fellows. In this case, that would mean preferring an interpretation of "public works" that yields a certain kinship between that term and "public building" and "monuments." This would seem to militate in favor of the Black's/Wikipedia definition. Note also that these three are followed by "lessening the burdens of government" which might be another hint. (I.e., organizations that support public works are deserving of tax exempt status because they lessen the burdens of government.)

I can also tell you anecdotally that, at least among lawyers, the term is very well known and is definitely widely understood as having the definition given by Black's and Wikipedia. There may be a creative argument to be made that an open source project is a public work (could make a fun law review article!), but I doubt it would go very far.