[gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Robin H. Johnson]

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On Mon, Jul 01, 2019 at 09:34:06PM +0200, Andreas K. Huettel wrote:
> > > Yes, I understand that.  However, I still believe that a contract
> > > initiated between CPA and a single small-ish entity such a Gentoo
> > > involves more costs than fees taken by umbrella dedicated to multiple
> > > entities.  Please correct me if I'm wrong.
> > 
> > Nobody knows yet. Different umbrellas work differently.

The CPA we have engaged so far, Corporate Capital, has a standard
preparation fee of USD1500 per fiscal year. We do have some estimates of
Umbrella fees, plus the Financial Statements I prepared...

> 
> Sigh. I agree with the second statement. The first one, well...
> 
> Here's the example of SPI (disclaimer, we do not know if they would take us):
> * no direct costs associated
> * 5% deduction from donations for SPI's overhead
> 
> Big Hint, it helps to first research something and then talk / discuss. That's 
> however, rather rare on this list.

The Trustees HAVE previously done _some_ of this legwork on the major
umbrellas, I don't have a link to hand, but I do remember details,
because it was in scope of my work as Treasurer; and we can combine
these with the financial statements to compare against the CPA quotes to
date. Further would should take the longer list of Umbrellas and
comprehensively document their costs.

As further concrete example:
https://sfconservancy.org/projects/apply/
>> How much does it cost us financially to join Conservancy?
>> New Conservancy members are required to pay 10% of their revenue

The umbrella fees I've seen range:
- smallest: 5% of net revenue (income less expenses)
- largest: 20% of gross income

The exact definition of which expenses might be included/excluded by a
given umbrella might also vary, I didn't find a clear public
documentation on it.

Basing that on the FY2018 fiscal, with the additional caveat that I
don't have any value assigned to in-kind server/hosting services
received by Infra; That would increase gross & net values.

Gross Income: USD 28,600.15
Gross Expenses: USD 9,292.95 
- Depreciation: USD 3,659.64 (it devalued assets but wasn't something we actually spent)
- "Real" Expense: USD 5,633.31
= Net revenue: USD 22,966.84

5% of net: USD 1,148.34
20% of gross: USD 5,720.03

At an outward glance, this does imply that some umbrellas would be
cheaper than a CPA, while others would be more expensive; but the
equation is more complicated, because we need to be careful about the
accounting of services that the umbrella would provide.

The equation therefore should be more of:
Cost(Umbrella) vs [Umbrella baseline without umbrella-provided expenses]

Regardless of the scale of the numbers, the change would REDUCE the
expenses, and increase the net revenue number (and thus also the
Umbrella's actual fee).

-- 
Robin Hugh Johnson
Gentoo Linux: Dev, Infra Lead, Foundation Treasurer
E-Mail   : robbat2@gentoo.org
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GnuPG FP : 7D0B3CEB E9B85B1F 825BCECF EE05E6F6 A48F6136

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[gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Rich Freeman]

On Wed, Jul 3, 2019 at 2:12 AM Robin H. Johnson <robbat2@gentoo.org> wrote:
>
> At an outward glance, this does imply that some umbrellas would be
> cheaper than a CPA, while others would be more expensive; but the
> equation is more complicated, because we need to be careful about the
> accounting of services that the umbrella would provide.
>
> The equation therefore should be more of:
> Cost(Umbrella) vs [Umbrella baseline without umbrella-provided expenses]
>

You also need to consider the tax savings themselves if the umbrella
is 501c3.  That is also a percentage of the net (the CPA costs being
deductible most likely).

You also need to consider services that we would receive that we
currently lack.  After all, Gentoo hasn't spent a dime on CPAs for a
long time, but that was hardly a true savings.

-- 
Rich

[gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Kristian Fiskerstrand]

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On 7/3/19 12:47 PM, Rich Freeman wrote:
> On Wed, Jul 3, 2019 at 2:12 AM Robin H. Johnson <robbat2@gentoo.org> wrote:
>> At an outward glance, this does imply that some umbrellas would be
>> cheaper than a CPA, while others would be more expensive; but the
>> equation is more complicated, because we need to be careful about the
>> accounting of services that the umbrella would provide.
>>
>> The equation therefore should be more of:
>> Cost(Umbrella) vs [Umbrella baseline without umbrella-provided expenses]
>>
> You also need to consider the tax savings themselves if the umbrella
> is 501c3.  That is also a percentage of the net (the CPA costs being
> deductible most likely).

It depends on the type of income, iirc e.g GSoC wouldn't be tax exempt
in either case. Same for royalties from sale of merchandise

> 
> You also need to consider services that we would receive that we
> currently lack.  After all, Gentoo hasn't spent a dime on CPAs for a
> long time, but that was hardly a true savings.

Also needs to account for potentially higher future earnings, we haven't
actually been doing active fundraising.

-- 
Kristian Fiskerstrand
OpenPGP keyblock reachable at hkp://pool.sks-keyservers.net
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[gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Rich Freeman]

On Wed, Jul 3, 2019 at 7:27 AM Kristian Fiskerstrand <k_f@gentoo.org> wrote:
>
> On 7/3/19 12:47 PM, Rich Freeman wrote:
> > You also need to consider the tax savings themselves if the umbrella
> > is 501c3.  That is also a percentage of the net (the CPA costs being
> > deductible most likely).
>
> It depends on the type of income, iirc e.g GSoC wouldn't be tax exempt
> in either case. Same for royalties from sale of merchandise

Certainly some forms of income aren't tax-exempt, and we should
definitely get a professional opinion on this.  However, have you seen
anything to suggest GSoC specifically is taxable?

I have been skimming the IRS materials, and in their training on the
subject they specifically bring up the example of a once-a-year food
stand that generates income at a conference, and that it wouldn't be
taxable because it isn't "regular" income, being only once a year and
doesn't really compete with a normal business that would be open every
day [1].  However, I don't profess to be an expert on IRS tax law.

It is probably a good idea to consider that some income will be
taxable.  Of course, it is still only net profits that are taxable, so
any GSoC money spent on GSoC itself wouldn't be net-taxable even if
the overall income would be (at least, that is my understanding).

And of course if we were using an umbrella org the org itself would
have its compliance staff make these determinations and have rules
around this stuff.  We wouldn't need to develop our own expertise and
chances are their staff could also make recommendations on how to
structure activities to minimize tax burden.  If they're charging
based on net income then it would be in their interests to minimize
our taxes anyway.

>
> >
> > You also need to consider services that we would receive that we
> > currently lack.  After all, Gentoo hasn't spent a dime on CPAs for a
> > long time, but that was hardly a true savings.
>
> Also needs to account for potentially higher future earnings, we haven't
> actually been doing active fundraising.

I have mixed feelings on this.  Numbers-wise you're right - if some
professional umbrella org gets a shared of anything donated to
"Gentoo" they're going to be out there advocating for people to donate
to "Gentoo."  As a result "Gentoo" will probably end up with a lot
more money.  On the surface this seems like a good thing.  On the
other hand, I do get concerned about what effect this could have on
the community and atmosphere of the project.

This is part of why I advocate for trying to reduce our dependency on
money and servers and so on.  These things all potentially come with
strings attached, and I'd prefer to be more dependent on the goodwill
of our code contributors than the goodwill of our
financial/sponsorship contributors.  I feel like a lot of bigger FOSS
projects eventually reach a point where the people in charge end up
with the opposite concerns - where they prefer all the core stuff to
be paid so that they don't have to worry as much about the rank and
file deciding they don't like the people in charge.

As much as we have disagreements around here, I think that those in
charge are very much community-oriented in their roots.  Some might
disagree, but I'd caution that to the degree that some disagree, the
professional managers that come with big budgets are going to be FAR
less to your liking.

1 - https://www.stayexempt.irs.gov/home/existing-organizations/unrelated-business-income


--
Rich

[gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Kristian Fiskerstrand]

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On 7/3/19 2:27 PM, Rich Freeman wrote:
> On Wed, Jul 3, 2019 at 7:27 AM Kristian Fiskerstrand <k_f@gentoo.org> wrote:
>>
>> On 7/3/19 12:47 PM, Rich Freeman wrote:
>>> You also need to consider the tax savings themselves if the umbrella
>>> is 501c3.  That is also a percentage of the net (the CPA costs being
>>> deductible most likely).
>>
>> It depends on the type of income, iirc e.g GSoC wouldn't be tax exempt
>> in either case. Same for royalties from sale of merchandise
> 
> Certainly some forms of income aren't tax-exempt, and we should
> definitely get a professional opinion on this.  However, have you seen
> anything to suggest GSoC specifically is taxable?
> 
[...]

Not really. Arguably Gentoo is in the business of producing code, to
receive monetary considerations for doing so is a related activity and
not a spurious one, we also have (or have had) mentor projects etc that
could be used to argue this case. I don't know, but if it is, it is a
more significant taxable income than most other we have which is why I
listed it first; the CPA/IRS which specialize in this under US tax law
will figure it out for us. But I agree that the merchandise is a cleaner
example, although not as regular and somewhat declining.

> It is probably a good idea to consider that some income will be 
> taxable.  Of course, it is still only net profits that are taxable
, so
> any GSoC money spent on GSoC itself wouldn't be net-taxable even if 
> the overall income would be (at least, that is my understanding).

Right, although there aren't that many expenditures related to GSoC.

> 
> And of course if we were using an umbrella org the org itself would
> have its compliance staff make these determinations and have rules
> around this stuff.  We wouldn't need to develop our own expertise and
> chances are their staff could also make recommendations on how to
> structure activities to minimize tax burden.  If they're charging
> based on net income then it would be in their interests to minimize
> our taxes anyway.

CPA would help us out in the case of foundation, iirc some tax forms
needs to be filled out related to payment from google as well, but I
haven't read these forms, they might shine some light on the
interpretations :)

>>
>> Also needs to account for potentially higher future earnings, we haven't
>> actually been doing active fundraising.
> 
> I have mixed feelings on this.  Numbers-wise you're right - if some
> professional umbrella org gets a shared of anything donated to
> "Gentoo" they're going to be out there advocating for people to donate
> to "Gentoo."  As a result "Gentoo" will probably end up with a lot
> more money.  On the surface this seems like a good thing.  On the
> other hand, I do get concerned about what effect this could have on
> the community and atmosphere of the project.
> 
> This is part of why I advocate for trying to reduce our dependency on
> money and servers and so on.  These things all potentially come with
> strings attached, and I'd prefer to be more dependent on the goodwill
> of our code contributors than the goodwill of our


Its an interesting point, but I personally don't agree, the discussion
is really too broad to take atm :)


-- 
Kristian Fiskerstrand
OpenPGP keyblock reachable at hkp://pool.sks-keyservers.net
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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Michał Górny]

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On Wed, 2019-07-03 at 06:12 +0000, Robin H. Johnson wrote:
> On Mon, Jul 01, 2019 at 09:34:06PM +0200, Andreas K. Huettel wrote:
> > > > Yes, I understand that.  However, I still believe that a contract
> > > > initiated between CPA and a single small-ish entity such a Gentoo
> > > > involves more costs than fees taken by umbrella dedicated to multiple
> > > > entities.  Please correct me if I'm wrong.
> > > 
> > > Nobody knows yet. Different umbrellas work differently.
> 
> The CPA we have engaged so far, Corporate Capital, has a standard
> preparation fee of USD1500 per fiscal year.

Does this cover everything 'standard', or are there additional potential
fees involved?  Are you aware if the fee is going to be the same if we
go for proper non-profit?

-- 
Best regards,
Michał Górny


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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Rich Freeman]

On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
>
> Are you aware if the fee is going to be the same if we
> go for proper non-profit?

Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?

I think most around here have abandoned all hope of ever running our
own 501c3.  A number don't even think we should try, and a 501c3 is
hard enough to get approved if you have a professional board all
towing the party line.  If you get people making public statements
like we ought to be a trade association (which is non-exempt) it would
be even harder.

However, I imagine most CPAs would charge more for a tax-exempt org as
there is MUCH more scrutiny on their operations.  I'd also argue that
we would need to be spending more on compliance in general or
consulting ad-hoc with professionals to not run afoul of the law.

If you meant a non-profit that isn't tax-exempt then I don't see why
their fees would be any different, but there really isn't any big tax
benefit to Gentoo to having one status or another as far as I can
tell.  The IRS taxes non-profits the same as for-profit companies if
they aren't tax-exempt.  It is the exempt status that comes with all
the rules and scrutiny.

Usually in the US when people say "non-profit" they tend to mean a
tax-exempt status like 501c3, but these are of course not the only
sorts of non-profit companies.  The US National Football League (the
kind where you usually don't hit the ball with your foot) is
non-profit, but definitely not tax-exempt, and I can only imagine what
their revenues are like.

-- 
Rich

Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Michał Górny]

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On Wed, 2019-07-03 at 09:08 -0400, Rich Freeman wrote:
> On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
> > Are you aware if the fee is going to be the same if we
> > go for proper non-profit?
> 
> Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?

I meant anything that's tax-exempt.

-- 
Best regards,
Michał Górny


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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Matthew Thode]

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On 19-07-03 09:08:14, Rich Freeman wrote:
> On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
> >
> > Are you aware if the fee is going to be the same if we
> > go for proper non-profit?
> 
> Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?
> 
> I think most around here have abandoned all hope of ever running our
> own 501c3.  A number don't even think we should try, and a 501c3 is
> hard enough to get approved if you have a professional board all
> towing the party line.  If you get people making public statements
> like we ought to be a trade association (which is non-exempt) it would
> be even harder.
> 
> However, I imagine most CPAs would charge more for a tax-exempt org as
> there is MUCH more scrutiny on their operations.  I'd also argue that
> we would need to be spending more on compliance in general or
> consulting ad-hoc with professionals to not run afoul of the law.
> 
> If you meant a non-profit that isn't tax-exempt then I don't see why
> their fees would be any different, but there really isn't any big tax
> benefit to Gentoo to having one status or another as far as I can
> tell.  The IRS taxes non-profits the same as for-profit companies if
> they aren't tax-exempt.  It is the exempt status that comes with all
> the rules and scrutiny.
> 
> Usually in the US when people say "non-profit" they tend to mean a
> tax-exempt status like 501c3, but these are of course not the only
> sorts of non-profit companies.  The US National Football League (the
> kind where you usually don't hit the ball with your foot) is
> non-profit, but definitely not tax-exempt, and I can only imagine what
> their revenues are like.
> 

The fees remain the same for a c3 (1500 per year).  We've talked to the
Accounting firm about our options in attaining c3 status.  There are a
couple of ways we could go about it.  Filing fee remains the same (~1k
iirc) for all options.

1. fix all back taxes (10 years) then refile, this would cost 9k more
for the back taxes alone (4 years was recently approved).

2. close the foundation and reform / refile as a c3.  Old foundation
donates all money to the new foundation.  This is what was suggested for
us to do, would be cheaper and give us both a fresh start, and would
give us the best chance of attaining c3 status.

3. Like 2, but with an umbrella (not something that's actively being
pursued).  If we wish to go down this route, attaining (2) would likely
increase the chances of an umbrella taking us in.


Personally I like option 2 or possibly 3 (depending on details).

-- 
Matthew Thode (prometheanfire)

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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Rich Freeman]

On Wed, Jul 3, 2019 at 10:34 AM Matthew Thode <prometheanfire@gentoo.org> wrote:
>
> 1. fix all back taxes (10 years) then refile, this would cost 9k more
> for the back taxes alone (4 years was recently approved).
>
> 2. close the foundation and reform / refile as a c3.  Old foundation
> donates all money to the new foundation.  This is what was suggested for
> us to do, would be cheaper and give us both a fresh start, and would
> give us the best chance of attaining c3 status.
>
> 3. Like 2, but with an umbrella (not something that's actively being
> pursued).  If we wish to go down this route, attaining (2) would likely
> increase the chances of an umbrella taking us in.

Seems like the simplest option would be to start with an umbrella
(completely separate from everything to-date), operate with the
umbrella for a little while to make sure we're happy, and then have
the Foundation donate everything it has left after settling accounts
to the umbrella.  Why would we need to start a 501c3 just to dissolve
it and donate it to the umbrella, when the umbrella is already going
to be a 501c3?

501c3s are not limited in receiving money only from other 501c3s.  If
anything they're more limited in who they can give their money to.

-- 
Rich

Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Matthew Thode]

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On 19-07-03 10:40:07, Rich Freeman wrote:
> On Wed, Jul 3, 2019 at 10:34 AM Matthew Thode <prometheanfire@gentoo.org> wrote:
> >
> > 1. fix all back taxes (10 years) then refile, this would cost 9k more
> > for the back taxes alone (4 years was recently approved).
> >
> > 2. close the foundation and reform / refile as a c3.  Old foundation
> > donates all money to the new foundation.  This is what was suggested for
> > us to do, would be cheaper and give us both a fresh start, and would
> > give us the best chance of attaining c3 status.
> >
> > 3. Like 2, but with an umbrella (not something that's actively being
> > pursued).  If we wish to go down this route, attaining (2) would likely
> > increase the chances of an umbrella taking us in.
> 
> Seems like the simplest option would be to start with an umbrella
> (completely separate from everything to-date), operate with the
> umbrella for a little while to make sure we're happy, and then have
> the Foundation donate everything it has left after settling accounts
> to the umbrella.  Why would we need to start a 501c3 just to dissolve
> it and donate it to the umbrella, when the umbrella is already going
> to be a 501c3?
> 
> 501c3s are not limited in receiving money only from other 501c3s.  If
> anything they're more limited in who they can give their money to.
> 

That's a fine option if we find a umbrella that would accept that 'order
of operations'.  So far they seemed happier if our status was better
confirmed.  It's possible that the 4 years that we are doing now to get
into a good state with the IRS would be enough.

-- 
Matthew Thode (prometheanfire)

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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Rich Freeman]

On Wed, Jul 3, 2019 at 10:45 AM Matthew Thode <prometheanfire@gentoo.org> wrote:
>
> On 19-07-03 10:40:07, Rich Freeman wrote:
> > On Wed, Jul 3, 2019 at 10:34 AM Matthew Thode <prometheanfire@gentoo.org> wrote:
> > >
> > > 1. fix all back taxes (10 years) then refile, this would cost 9k more
> > > for the back taxes alone (4 years was recently approved).
> > >
> > > 2. close the foundation and reform / refile as a c3.  Old foundation
> > > donates all money to the new foundation.  This is what was suggested for
> > > us to do, would be cheaper and give us both a fresh start, and would
> > > give us the best chance of attaining c3 status.
> > >
> > > 3. Like 2, but with an umbrella (not something that's actively being
> > > pursued).  If we wish to go down this route, attaining (2) would likely
> > > increase the chances of an umbrella taking us in.
> >
> > Seems like the simplest option would be to start with an umbrella
> > (completely separate from everything to-date), operate with the
> > umbrella for a little while to make sure we're happy, and then have
> > the Foundation donate everything it has left after settling accounts
> > to the umbrella.  Why would we need to start a 501c3 just to dissolve
> > it and donate it to the umbrella, when the umbrella is already going
> > to be a 501c3?
> >
> > 501c3s are not limited in receiving money only from other 501c3s.  If
> > anything they're more limited in who they can give their money to.
> >
>
> That's a fine option if we find a umbrella that would accept that 'order
> of operations'.  So far they seemed happier if our status was better
> confirmed.  It's possible that the 4 years that we are doing now to get
> into a good state with the IRS would be enough.

I suspect that they're more concerned with being in good standing than
501c3 status.  They probably don't want to incur any liability if the
IRS comes after them as some kind of successor in interest.

This is also why I think that running side-by-side could be a cleaner
solution.  Then you can start up new operations under the new banner,
start closing down old stuff, get the old checkbook register into a
quiescent state, do the final paperwork to close things out, and then
write a check for whatever is left on the balance sheet.  If you don't
do any large transfers during the transition period then you might
also avoid any concerns about the new entity inheriting any IRS
concerns.

The cleanest solution would be basically an internal fork.  I'm not
necessarily suggesting this, but if things were really bad we could
just all fork ourselves (everything is FOSS), come up with a new name,
collect donations under the new name, and spin up all new activities
under the new name with the new money.  The old entity could spend
down what it has and stop accepting donations.

However, that isn't really necessary if we can get into compliance and
people are willing to deal with us as-is, and going that route
eliminates the risk of somebody coming after the new org for the
remaining messes of the old one.

And all of this is why I think it would be nice if we had an
infra-less core.  If Gentoo could withstand losing all its tangible
assets all of this stuff would be less of a worry...

-- 
Rich

Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Matthew Thode]

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On 19-07-03 10:59:25, Rich Freeman wrote:
> On Wed, Jul 3, 2019 at 10:45 AM Matthew Thode <prometheanfire@gentoo.org> wrote:
> >
> > On 19-07-03 10:40:07, Rich Freeman wrote:
> > > On Wed, Jul 3, 2019 at 10:34 AM Matthew Thode <prometheanfire@gentoo.org> wrote:
> > > >
> > > > 1. fix all back taxes (10 years) then refile, this would cost 9k more
> > > > for the back taxes alone (4 years was recently approved).
> > > >
> > > > 2. close the foundation and reform / refile as a c3.  Old foundation
> > > > donates all money to the new foundation.  This is what was suggested for
> > > > us to do, would be cheaper and give us both a fresh start, and would
> > > > give us the best chance of attaining c3 status.
> > > >
> > > > 3. Like 2, but with an umbrella (not something that's actively being
> > > > pursued).  If we wish to go down this route, attaining (2) would likely
> > > > increase the chances of an umbrella taking us in.
> > >
> > > Seems like the simplest option would be to start with an umbrella
> > > (completely separate from everything to-date), operate with the
> > > umbrella for a little while to make sure we're happy, and then have
> > > the Foundation donate everything it has left after settling accounts
> > > to the umbrella.  Why would we need to start a 501c3 just to dissolve
> > > it and donate it to the umbrella, when the umbrella is already going
> > > to be a 501c3?
> > >
> > > 501c3s are not limited in receiving money only from other 501c3s.  If
> > > anything they're more limited in who they can give their money to.
> > >
> >
> > That's a fine option if we find a umbrella that would accept that 'order
> > of operations'.  So far they seemed happier if our status was better
> > confirmed.  It's possible that the 4 years that we are doing now to get
> > into a good state with the IRS would be enough.
> 
> I suspect that they're more concerned with being in good standing than
> 501c3 status.  They probably don't want to incur any liability if the
> IRS comes after them as some kind of successor in interest.
> 
> This is also why I think that running side-by-side could be a cleaner
> solution.  Then you can start up new operations under the new banner,
> start closing down old stuff, get the old checkbook register into a
> quiescent state, do the final paperwork to close things out, and then
> write a check for whatever is left on the balance sheet.  If you don't
> do any large transfers during the transition period then you might
> also avoid any concerns about the new entity inheriting any IRS
> concerns.
> 
> The cleanest solution would be basically an internal fork.  I'm not
> necessarily suggesting this, but if things were really bad we could
> just all fork ourselves (everything is FOSS), come up with a new name,
> collect donations under the new name, and spin up all new activities
> under the new name with the new money.  The old entity could spend
> down what it has and stop accepting donations.
> 
> However, that isn't really necessary if we can get into compliance and
> people are willing to deal with us as-is, and going that route
> eliminates the risk of somebody coming after the new org for the
> remaining messes of the old one.
> 
> And all of this is why I think it would be nice if we had an
> infra-less core.  If Gentoo could withstand losing all its tangible
> assets all of this stuff would be less of a worry...
> 

You keep on pushing an infraless core, which is a nice idea but should
not be tacked onto this.  This is about fixing the tax / legal
situation.  Once that's done we can move on to other things (like
infraless core).  Stating these things tends to drive these threads into
tagents.  If you wish to continue discussing the subject start a new
thread.  (I'm not against it, just want to stay focused)

-- 
Matthew Thode (prometheanfire)

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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Michał Górny]

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On Wed, 2019-07-03 at 09:34 -0500, Matthew Thode wrote:
> On 19-07-03 09:08:14, Rich Freeman wrote:
> > On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
> > > Are you aware if the fee is going to be the same if we
> > > go for proper non-profit?
> > 
> > Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?
> > 
> > I think most around here have abandoned all hope of ever running our
> > own 501c3.  A number don't even think we should try, and a 501c3 is
> > hard enough to get approved if you have a professional board all
> > towing the party line.  If you get people making public statements
> > like we ought to be a trade association (which is non-exempt) it would
> > be even harder.
> > 
> > However, I imagine most CPAs would charge more for a tax-exempt org as
> > there is MUCH more scrutiny on their operations.  I'd also argue that
> > we would need to be spending more on compliance in general or
> > consulting ad-hoc with professionals to not run afoul of the law.
> > 
> > If you meant a non-profit that isn't tax-exempt then I don't see why
> > their fees would be any different, but there really isn't any big tax
> > benefit to Gentoo to having one status or another as far as I can
> > tell.  The IRS taxes non-profits the same as for-profit companies if
> > they aren't tax-exempt.  It is the exempt status that comes with all
> > the rules and scrutiny.
> > 
> > Usually in the US when people say "non-profit" they tend to mean a
> > tax-exempt status like 501c3, but these are of course not the only
> > sorts of non-profit companies.  The US National Football League (the
> > kind where you usually don't hit the ball with your foot) is
> > non-profit, but definitely not tax-exempt, and I can only imagine what
> > their revenues are like.
> > 
> 
> The fees remain the same for a c3 (1500 per year).  We've talked to the
> Accounting firm about our options in attaining c3 status.  There are a
> couple of ways we could go about it.  Filing fee remains the same (~1k
> iirc) for all options.
> 
> 1. fix all back taxes (10 years) then refile, this would cost 9k more
> for the back taxes alone (4 years was recently approved).
> 

Plus $15000 in CPA fees, correct?  Or do we assume a different fee for
that part?

-- 
Best regards,
Michał Górny


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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Michał Górny]

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On Wed, 2019-07-03 at 17:12 +0200, Michał Górny wrote:
> On Wed, 2019-07-03 at 09:34 -0500, Matthew Thode wrote:
> > On 19-07-03 09:08:14, Rich Freeman wrote:
> > > On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
> > > > Are you aware if the fee is going to be the same if we
> > > > go for proper non-profit?
> > > 
> > > Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?
> > > 
> > > I think most around here have abandoned all hope of ever running our
> > > own 501c3.  A number don't even think we should try, and a 501c3 is
> > > hard enough to get approved if you have a professional board all
> > > towing the party line.  If you get people making public statements
> > > like we ought to be a trade association (which is non-exempt) it would
> > > be even harder.
> > > 
> > > However, I imagine most CPAs would charge more for a tax-exempt org as
> > > there is MUCH more scrutiny on their operations.  I'd also argue that
> > > we would need to be spending more on compliance in general or
> > > consulting ad-hoc with professionals to not run afoul of the law.
> > > 
> > > If you meant a non-profit that isn't tax-exempt then I don't see why
> > > their fees would be any different, but there really isn't any big tax
> > > benefit to Gentoo to having one status or another as far as I can
> > > tell.  The IRS taxes non-profits the same as for-profit companies if
> > > they aren't tax-exempt.  It is the exempt status that comes with all
> > > the rules and scrutiny.
> > > 
> > > Usually in the US when people say "non-profit" they tend to mean a
> > > tax-exempt status like 501c3, but these are of course not the only
> > > sorts of non-profit companies.  The US National Football League (the
> > > kind where you usually don't hit the ball with your foot) is
> > > non-profit, but definitely not tax-exempt, and I can only imagine what
> > > their revenues are like.
> > > 
> > 
> > The fees remain the same for a c3 (1500 per year).  We've talked to the
> > Accounting firm about our options in attaining c3 status.  There are a
> > couple of ways we could go about it.  Filing fee remains the same (~1k
> > iirc) for all options.
> > 
> > 1. fix all back taxes (10 years) then refile, this would cost 9k more
> > for the back taxes alone (4 years was recently approved).
> > 
> 
> Plus $15000 in CPA fees, correct?  Or do we assume a different fee for
> that part?
> 

Ok, Matthew corrected me on IRC.  He meant $9k of CPA fees for
the remaining 6 of 10 years.

-- 
Best regards,
Michał Górny


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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response! (part 2)

[Robin H. Johnson]

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On Wed, Jul 03, 2019 at 10:41:36PM +0200, Michał Górny wrote:
> > > The fees remain the same for a c3 (1500 per year).  We've talked to the
> > > Accounting firm about our options in attaining c3 status.  There are a
> > > couple of ways we could go about it.  Filing fee remains the same (~1k
> > > iirc) for all options.
> > > 
> > > 1. fix all back taxes (10 years) then refile, this would cost 9k more
> > > for the back taxes alone (4 years was recently approved).
> > > 
> > 
> > Plus $15000 in CPA fees, correct?  Or do we assume a different fee for
> > that part?
> > 
> 
> Ok, Matthew corrected me on IRC.  He meant $9k of CPA fees for
> the remaining 6 of 10 years.
In my previous email, "Motion: approve preparation costs for tax filings
FY2016-FY2019", I covered my estimate of the
taxes/interest/penalties/fines that I expected for the FY2016-FY2018
periods (a total of USD9,300.00, on top of the preparation costs of
USD4,500 for those 3 years; the Motion included FY2019 that I omit
temporarily here).

For the further 6 years back:
- Preparation: 6x USD1500 = USD9,000.00
- Taxes/Interest/Penalties/Fines: USD16,000.00
Which gives a total of USD 25,000

The comparison quote from Corporate Capital, for preparation & legal
costs, to create new 501cX for Gentoo, is USD 2,500.

This doesn't include the filing fees, which prometheanfire estimating
around USD 1,000, but would vary greatly depending on which state we
filed in. I think that estimate might be as high as USD 2,000.00
depending on other states, with further traps of ongoing costs (Some
states effectively have state or local taxes even on NFP incomes)

The order of operations for the new org would be approximately:
- prepare state-level filings to start a new NFP
- file to state & wait for response
- file to IRS, initial stuff
- wait N years [depends on the exact NFP structure]
- file to IRS, later stuff

I do agree that the wind-up of the old 501c6 could happen in parallel,
with the donation made to the new entity

Another short-term reason AGAINST our own 501c3 are the donation
structure requirements, that are meant to ensure a diversity of donors.
FreeBSD ran into this in 2004:
https://web.archive.org/web/20050112120244/http://www.freebsdfoundation.org/press/20041221-newsletter.shtml
"The FreeBSD Foundation's 501(c)3 Status"

The Gentoo Foundation DOES presently have one large cash donor, who
would presently cause us to fail the 1/3rd test.

The proposal of doing a large donation from the old Foundation to a new
Foundation could ALSO violate the 1/3rd test, so doing the donations
over time might be needed (I'd literally start taking new donations, and
at the end of every month, have the old foundation make the maximum
possible donation that wouldn't violate the 2% clause on the 1/3rd
test). The old Foundation would also continue to pay expenses out of the
accounts, to reduce the need to shift amounts over.

-- 
Robin Hugh Johnson
Gentoo Linux: Dev, Infra Lead, Foundation Treasurer
E-Mail   : robbat2@gentoo.org
GnuPG FP : 11ACBA4F 4778E3F6 E4EDF38E B27B944E 34884E85
GnuPG FP : 7D0B3CEB E9B85B1F 825BCECF EE05E6F6 A48F6136

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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response! (part 2)

[Robin H. Johnson]

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(Apologies to the -nfp list, but I missed sending this to both -nfp and
-project the first time, and since it concerns the Council election, I
felt it important enough to resend. If everybody else could try to
include a header containing
Reply-To: gentoo-nfp@lists.gentoo.org, gentoo-project@lists.gentoo.org 
in the thread, I think it would help overall)

On Wed, Jul 03, 2019 at 10:41:36PM +0200, Michał Górny wrote:
> > > The fees remain the same for a c3 (1500 per year).  We've talked to the
> > > Accounting firm about our options in attaining c3 status.  There are a
> > > couple of ways we could go about it.  Filing fee remains the same (~1k
> > > iirc) for all options.
> > > 
> > > 1. fix all back taxes (10 years) then refile, this would cost 9k more
> > > for the back taxes alone (4 years was recently approved).
> > > 
> > 
> > Plus $15000 in CPA fees, correct?  Or do we assume a different fee for
> > that part?
> > 
> 
> Ok, Matthew corrected me on IRC.  He meant $9k of CPA fees for
> the remaining 6 of 10 years.
In my previous email, "Motion: approve preparation costs for tax filings
FY2016-FY2019", I covered my estimate of the
taxes/interest/penalties/fines that I expected for the FY2016-FY2018
periods (a total of USD9,300.00, on top of the preparation costs of
USD4,500 for those 3 years; the Motion included FY2019 that I omit
temporarily here).

For the further 6 years back:
- Preparation: 6x USD1500 = USD9,000.00
- Taxes/Interest/Penalties/Fines: USD16,000.00
Which gives a total of USD 25,000

The comparison quote from Corporate Capital, for preparation & legal
costs, to create new 501cX for Gentoo, is USD 2,500.

This doesn't include the filing fees, which prometheanfire estimating
around USD 1,000, but would vary greatly depending on which state we
filed in. I think that estimate might be as high as USD 2,000.00
depending on other states, with further traps of ongoing costs (Some
states effectively have state or local taxes even on NFP incomes)

The order of operations for the new org would be approximately:
- prepare state-level filings to start a new NFP
- file to state & wait for response
- file to IRS, initial stuff
- wait N years [depends on the exact NFP structure]
- file to IRS, later stuff

I do agree that the wind-up of the old 501c6 could happen in parallel,
with the donation made to the new entity

Another short-term reason AGAINST our own 501c3 are the donation
structure requirements, that are meant to ensure a diversity of donors.
FreeBSD ran into this in 2004:
https://web.archive.org/web/20050112120244/http://www.freebsdfoundation.org/press/20041221-newsletter.shtml
"The FreeBSD Foundation's 501(c)3 Status"

The Gentoo Foundation DOES presently have one large cash donor, who
would presently cause us to fail the 1/3rd test.

The proposal of doing a large donation from the old Foundation to a new
Foundation could ALSO violate the 1/3rd test, so doing the donations
over time might be needed (I'd literally start taking new donations, and
at the end of every month, have the old foundation make the maximum
possible donation that wouldn't violate the 2% clause on the 1/3rd
test). The old Foundation would also continue to pay expenses out of the
accounts, to reduce the need to shift amounts over.

-- 
Robin Hugh Johnson
Gentoo Linux: Dev, Infra Lead, Foundation Treasurer
E-Mail   : robbat2@gentoo.org
GnuPG FP : 11ACBA4F 4778E3F6 E4EDF38E B27B944E 34884E85
GnuPG FP : 7D0B3CEB E9B85B1F 825BCECF EE05E6F6 A48F6136

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Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Aaron Bauman]

On Wed, Jul 03, 2019 at 09:08:14AM -0400, Rich Freeman wrote:
> On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
> >
> > Are you aware if the fee is going to be the same if we
> > go for proper non-profit?
> 
> Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?
> 
> I think most around here have abandoned all hope of ever running our
> own 501c3.  A number don't even think we should try, and a 501c3 is
> hard enough to get approved if you have a professional board all
> towing the party line.  If you get people making public statements
> like we ought to be a trade association (which is non-exempt) it would
> be even harder.
>

This is not true. A 501c3 is not some mysterious unicorn that no one can obtain.
Plenty of organizations gain tax-exempt status with the IRS by simply filing and
following the law.  We will be just fine if we decide to maintain a 501c3.

> However, I imagine most CPAs would charge more for a tax-exempt org as
> there is MUCH more scrutiny on their operations.  I'd also argue that
> we would need to be spending more on compliance in general or
> consulting ad-hoc with professionals to not run afoul of the law.
> 

No, not true either.

-- 
Cheers,
Aaron

Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[Rich Freeman]

On Fri, Jul 5, 2019 at 3:45 AM Aaron Bauman <bman@gentoo.org> wrote:
>
> On Wed, Jul 03, 2019 at 09:08:14AM -0400, Rich Freeman wrote:
> > On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
> > >
> > > Are you aware if the fee is going to be the same if we
> > > go for proper non-profit?
> >
> > Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?
> >
> > I think most around here have abandoned all hope of ever running our
> > own 501c3.  A number don't even think we should try, and a 501c3 is
> > hard enough to get approved if you have a professional board all
> > towing the party line.  If you get people making public statements
> > like we ought to be a trade association (which is non-exempt) it would
> > be even harder.
> >
>
> This is not true. A 501c3 is not some mysterious unicorn that no one can obtain.

I never claimed it was.

> Plenty of organizations gain tax-exempt status with the IRS by simply filing and
> following the law.

Absolutely true.

> We will be just fine if we decide to maintain a 501c3.

Not true at all.  Lots of organizations would have no problems
becoming a 501c3.  Gentoo is not those organizations.

If you want to be a 501c3 you need to spend several years working
towards that status.  You need to present yourself as fitting into the
categories that the status pertains to.  You need to file your taxes
on time and so on.

I can't tell you how many times I've seen Trustees post on this list
or on IRC saying that they don't think that we should even be a 501c3
and should be a non-exempt status like 501c6/etc.  What is the chance
that we'll be able to refrain from having board members do that for 5
years or so?  Heck, I'm skeptical that we'll ever manage to file our
taxes on time 5 years in a row, though I at least see that as being
conceivable.

And then we have our history of non-compliance.  That will only make
things harder even if everybody does everything right.

So, yes, all things being equal some hypothetical organization that
does what Gentoo does could probably become a 501c3.  However, Gentoo
isn't some hypothetical organization and all things are not equal.
We're an organization with many conflicting views on how it ought to
be operated, with members who aren't all that interested in running a
non-profit, and with relatively limited interest in fundraising/etc.

Now, I wouldn't be opposed to just letting people who want to try to
create their own 501c3 play around with it for another decade or two,
except that in the meantime I think we're avoiding putting effort into
other approaches that are more likely to work out, like joining an
umbrella.

-- 
Rich

Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response!

[desultory]

On 07/05/19 11:00, Rich Freeman wrote:
> On Fri, Jul 5, 2019 at 3:45 AM Aaron Bauman <bman@gentoo.org> wrote:
>>
>> On Wed, Jul 03, 2019 at 09:08:14AM -0400, Rich Freeman wrote:
>>> On Wed, Jul 3, 2019 at 8:56 AM Michał Górny <mgorny@gentoo.org> wrote:
>>>>
>>>> Are you aware if the fee is going to be the same if we
>>>> go for proper non-profit?
>>>
>>> Do you mean 501c3 by "proper non-profit?"  Or some other tax-exempt status?
>>>
>>> I think most around here have abandoned all hope of ever running our
>>> own 501c3.  A number don't even think we should try, and a 501c3 is
>>> hard enough to get approved if you have a professional board all
>>> towing the party line.  If you get people making public statements
>>> like we ought to be a trade association (which is non-exempt) it would
>>> be even harder.
>>>
>>
>> This is not true. A 501c3 is not some mysterious unicorn that no one can obtain.
> 
> I never claimed it was.
> 
Then why, pray tell, did you frame it as though 501c(3) status is some
kind of mystical unicorn and we are fresh out of maidens with an
equestrian bent?

>> Plenty of organizations gain tax-exempt status with the IRS by simply filing and
>> following the law.
> 
> Absolutely true.
> 
>> We will be just fine if we decide to maintain a 501c3.
> 
> Not true at all.  Lots of organizations would have no problems
> becoming a 501c3.  Gentoo is not those organizations.
> 
Again, please, substantive data, not handwaving.

> If you want to be a 501c3 you need to spend several years working
> towards that status.  You need to present yourself as fitting into the
> categories that the status pertains to.  You need to file your taxes
> on time and so on.
> 
Then why, pray tell, do you think the current Trustees voted to  hire a
CPA to work on the back taxes?

> I can't tell you how many times I've seen Trustees post on this list
> or on IRC saying that they don't think that we should even be a 501c3
> and should be a non-exempt status like 501c6/etc.  What is the chance
> that we'll be able to refrain from having board members do that for 5
> years or so?  Heck, I'm skeptical that we'll ever manage to file our
> taxes on time 5 years in a row, though I at least see that as being
> conceivable.
> 
Stating a personal opinions is not somehow compelling the IRS to agree
with them, even as a board member of an organization stating personal
opinions about that organization. The filings of the organization,
unless demonstrably false, would have distinctly more sway over the
official opinions of the IRS.

> And then we have our history of non-compliance.  That will only make
> things harder even if everybody does everything right.
> 
> So, yes, all things being equal some hypothetical organization that
> does what Gentoo does could probably become a 501c3.  However, Gentoo
> isn't some hypothetical organization and all things are not equal.
> We're an organization with many conflicting views on how it ought to
> be operated, with members who aren't all that interested in running a
> non-profit, and with relatively limited interest in fundraising/etc.
> 
> Now, I wouldn't be opposed to just letting people who want to try to
> create their own 501c3 play around with it for another decade or two,
> except that in the meantime I think we're avoiding putting effort into
> other approaches that are more likely to work out, like joining an
> umbrella.
> 
Given your lack of opposition to creating a 501c(3) to "play around with
it for another decade or two", if it were to last that long, why,
exactly do you posit that an umbrella organization would necessarily be
"more likely to work out"? Given your hypothetical, the 501c(3) stood up
to "play around with " would seem to have been, or at least at some
point become, rather stable.