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

[Rich Freeman <rich0@gentoo.org>]

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