
Open Source Madness - aroman
https://www.eff.org/deeplinks/2014/07/open-source-madness
======
jedberg
The problem here is that it could create a huge loophole. I'd love to be able
to write off my donations to open source groups, but so would big companies.

Imagine a situation where a company that develops their software as open
source, like reddit for example, setting up a 503(c) and putting all the
developers and all the reddit gold revenue into the 503(c), thereby getting a
massive write-off for the "donations" and not having to show profit on reddit
gold.

Or worse, someone like IBM putting all their consultants into a 503(c) and
taking all their consulting revenue as donations.

~~~
DoubleMalt
And you know what:

That would be absolutely fine.

It would create a huge incentive for companies to develop at least parts of
their software as open source. Think of how much reinventions of the wheel we
could avoid if run of the mill components for companies would be in the open.

The IBM case is unrealistic because IBM would still need to make profits for
it's shareholders. If IBM was to transform into a huge non for profit that
uses consultants' fees to develop open source software (think of open source
Watson), That would definitely a net plus for society that would outweigh the
loss of double dutch diminished corporate taxes by several orders of
magnitude.

~~~
trhway
>It would create a huge incentive for companies to develop at least parts of
their software as open source. Think of how much reinventions of the wheel we
could avoid if run of the mill components for companies would be in the open.

one can also imagine that the "open-source non-profit IBM" would have much
more troubles trying to enforce its patents thus resulting in even more open
innovation and bigger benefit for the society.

~~~
zanny
How would it be open source with patent restrictions? I guess they could write
their own false foss license that gives them an excemption on it, but it would
not be gpl compatible.

~~~
olefoo
You are assuming that the patent-holding organization is the same as the open-
sourcing organization; they could be legally separate and controlled by the
parent corporation.

In this case; you would be worried about software that was widely used and had
both infringing and non-infringing uses. Especially if the patent-holding org
waited for several years before they started enforcing.

The software license and patent grants are orthogonal; and while it's not a
good look for an organization to give with one hand and take with the other
it's certainly a legally plausible strategy.

~~~
malandrew
IANAL, but I would imagine that in such a situation you may be able to get the
case thrown own because you could demonstrate that the licensing organization
and the patent-holding organization are related and that the license was not
offered in good faith.

~~~
olefoo
Actually you wouldn't be able to show any such thing. The license is a grant
of one set of rights ( to use the software, make copies, resell it,
incorporate it into products, etc. ) but the Patents would be the enforcement
of another set of rights ( to prevent infringement of the protected idea ) the
two sets of rights are orthogonal, and although you might have rights to use
the software from a copyright licensing perspective; doing so might be an
infringement on their patent rights.

And those two sets of rights need not inhere in the same organization.
Remember when Microsoft was threatening to use it's patent portfolio against
any company that used linux...?

------
dkural
While the software itself may be free and open, often the authors of the
software provide consulting & professional services around the implementation
of the software. If the software in question has a primarily commercial
purpose, I can see this conflict of interest confusing authorities.

Open Source is a widely used marketing and product strategy used to gain
traction &market share and make substantial capital gains by the owners
Github, MongoDB and many other start-ups.

It's not clear to me any of this is "non-profit" by default.

~~~
malandrew
If some of society has benefitted and the organization has not made a profit
from those benefits, then I'd say that the non-profit claim is valid and we
are all better off for it.

There are tons of people who use MongoDB without paying MongoDB(Tengen) a
penny.

Even though I totally understand the IRS concerns, eliminating this benefit
creates a disincentive for the commons, and we are all poorer because of it.

I think one of the metrics that could be used here to determine full or
partial non-profit status is the community around a piece of software. The
active community is a representative, albeit biased/skewed, sample of the
entire community using the open source software in question. Polling these
unrelated parties (i.e. there is no contractual obligation between them and
the software producing entity beyond a commonly accepted open source license)
should be sufficient to figure out if an organization should qualify for non-
profit status.

------
dasil003
"Please explain how the activities of this organization differ from a
commercial software development company beside distributing the software for
free."

Please explain how the activities of your soup kitchen serving meals to the
homeless differ from a commercial restaurant serving meals to the rich and
famous of Beverly Hills beside distributing the food for free.

~~~
gph
Because the soup kitchen is providing a charitable service and product to a
segment of the population that wouldn't otherwise be able to provide for
themselves.

Now imagine if there was a "charitable" catering group that accepted donations
from large corporations and used it to provide free catering near corporate
events. Should they be allowed non-profit status?

The whole argument is that it matters who the end product is going to. There
are a number of open source projects that mostly get donations from large
corporations who are the main end-users of the software. Should they be non-
profit? And there's a whole grey area in between. The IRS seems to be drawing
a strong line where the authors of this article think there needs to be more
of a grey area.

Personally I don't have a problem with being more liberal with non-profit for
FOSS organizations. But it's certainly not as clear cut as your analogy is
making it sound.

~~~
__david__
> Now imagine if there was a "charitable" catering group that accepted
> donations from large corporations and used it to provide free catering near
> corporate events. Should they be allowed non-profit status?

Are the open to the general public? Are homeless people not turned away at the
door? If yes, then yes, they should be allowed non-profit status.

~~~
gph
Just because something is theoretically open to the public, doesn't mean it's
accessible or useful to the public. If the catering event is setup outside
Google HQ or even in a public park in a rich or rural area it's not like a
bunch of homeless people are going to show up.

The same is true for many OSS products. Yes, anyone from the public with an
internet connection has access to the software. But what's the point if the
software is only really applicable to certain commercial interests?

~~~
__david__
> But what's the point if the software is only really applicable to certain
> commercial interests?

Because it's available to all companies with the same commercial interests.
OSI approved licenses are all non-discriminatory, so if you are open sourcing
the software your business is built on, then the code is useful to not just
your own business interests, but every company that shares your business
interests, competitors included.

I think that if you're releasing software in such a non-discriminatory manner
then it _is_ for the greater good (even if that greater good is only
potential) and should be eligible for non-profit status.

------
tslug
It isn't just open source. The whole US non-profit application process is
needlessly long and difficult for anyone seeking it, which is generally, you
know, the most benevolent people living amoungst us (like, for example, open
source software developers). For years, the workaround on the delay has been
to partner with a pre-existing non-profit.

In the meantime, if you want to start a for-profit company, why you can pick
from one of a half dozen different varieties in any state in the nation by
clicking on a few buttons on a website.

The only possible counter-argument to making it easy is worry about fraud. For
every other reason, starting a non-profit should be easy, but if fraud's the
big one, then for goodness sake, spend some money watching the non-profits.

The government should be, anyway, because most non-profits are doing works for
the public good, you know- that stuff that the government used to fund? Maybe
it could learn a thing or two? Maybe the government could pro-actively send
them funding, instead of them having to wait and wonder whether a grant
application will go through?

~~~
tptacek
How does the US process of obtaining tax-exempt non-profit status compare to
that of countries in Europe?

~~~
yxhuvud
Well, for starters the countries of EU have not harmonized any such procedure
yet, so there is all kinds of different variants.

[http://www.eatlp.org/uploads/public/Reports%20Rotterdam/Them...](http://www.eatlp.org/uploads/public/Reports%20Rotterdam/Thematic%20report%20Amatucci%20%28section%202a%29.pdf)
has some information.

------
trhway
i wish they apply the same principles to the tax exempt status of churches -
as, for example, distribution of entertainment media products for money done
by a church has no substantial difference from that done by a [commercial]
Hollywood studio.

~~~
malandrew
If you want to read something interesting involving religious groups and
avoiding taxes and taking advantage of welfare programs, read up on the Kiryas
Joel community.

------
thrush
First company I thought of when reading this was Famo.us. They are creating
open source Javascript frameworks, but then want to sell hosting solutions
that handle their stack (something along those lines).

------
xbryanx
Does this mean that if I currently work at a non-profit developing open source
software--not our primary goal, just sharing tools we make--that I'm
jeopardizing our 501(c)(3) status?

~~~
tedunangst
No.

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laurent123456
Though I don't know all the details I can see how the IRS could arrive to this
conclusion. Otherwise any company could open source their in-house software
(no matter in which state it is), then claim tax exemption.

~~~
guard-of-terra
And we'll have a lot of open source software covering huge range of potential
corporate needs, possibly saving a lot of money for everyone. Win? Win!

Of course one could specifically craft their software to be unusable by
everyone but them, but it sounds like additional work for them with no clear
benefit.

~~~
moron4hire
"Additional work with no clear benefit" never stopped a project manager
before.

------
noonespecial
The hair that's split is ours (free software) so we care, but we should
probably be more concerned about the _5 year wait_ to get a decision! That is
unreasonable to the point of unworkable.

------
dahart
NP != OS, until proven otherwise :P

------
mindcrime
Just eliminate the IRS and income taxes, and this problem goes away. Move most
government services, for which there is an actual market, to private for-
profit or non-profit organizations, or voluntarily assembled communes or co-
ops. Fund the rest of the government apparatus through usage fees where the
government service is providing value that someone will pay for.

Does this expose a "free rider" problem? Yes. Is that important? No.

~~~
21echoes
i'm sure that this will cause no amount of poor people to no longer have
enough money for food, water, or shelter, much less health care, education, or
other social contract goods, because enough non-profits will spring up to fill
the gap and richer people will just be begging to fund them with all their
freed up capital from no longer having to pay taxes. right? right? man this
just sounds so pleasant a society to live in, i can't wait til we get there.

~~~
mindcrime
_i 'm sure that this will cause no amount of poor people to no longer have
enough money for food, water, or shelter, much less health care, education, or
other social contract goods, because enough non-profits will spring up to fill
the gap and richer people will just be begging to fund them with all their
freed up capital from no longer having to pay taxes. right?_

Who knows? More likely it would lead to a lot less poor people, and much lower
prices for health care, education, etc., so there would be a much smaller
problem of poor people lacking such essentials to begin with.

Whatever you think about that, it's clear that the _present_ system certainly
hasn't done a very good job of eliminating poverty. I would think it's time to
try an alternative.

In either case, it would be a Good Thing to have less institutionalized use of
force in our society.

