Open Source Madness
eff.org
eff.org
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.
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.
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.
Edit: hah, I wanted to reply to parent, but must have misclicked. The comment applies here too, though :)
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.
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...?
2. I would say that GPLv2 is still considered open source by even the FSF, but it did not restrict software from being patent-encumbered. This was one of the major "loopholes" that the GPLv3 license was meant to close.
Yes, indeed GPLv3 (or AGPLv3 or LGPLv3) is the best overall license for protecting freedoms and closing part of the patent concerns.
As another commenter mentioned the patent holder may be commercial parent organization who granted the patent rights to the open-source non-commercial "daughter", yet even in this case i think [or may be just hope :) ] that they would have tougher time in court trying to show the damage caused by the patent violation by another open-source.
Also, if the arrangement did create some tax savings, your profits would now be stuck in a non-for-profit organization which is probably not what you wanted.
> someone like IBM putting all their consultants into a 503(c) and taking all their consulting revenue as donations.
If you provide goods and services in exchange for a charitable donation, the value of these must be subtracted from the value of the donations, negating any benefits from that arrangement.
Reddit is already getting a "massive write-off" for its developers salaries. It's called a payroll expense and it's directly deducted from any income the corporation makes before calculating it's profit.
Formula: Reddit's revenue - all of its expense (including payroll) = profit that it has to pay taxes on.
In that same way, corporations that are paying IBM for their consulting services already deduct those payments from their revenue. The payment doesn't need to be a donation. It's a legitimate business expense.
Unofficially? Look how many "charities" pay their founders/presidents 6-figure salaries.
Imagine if your typical software company went this route instead of pursuing software patents. Two birds with one stone!
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.
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.
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.
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.
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.
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?
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.
You like putting a bomb under your society, you just go on.
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?
http://www.eatlp.org/uploads/public/Reports%20Rotterdam/Them... has some information.
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.
Does this expose a "free rider" problem? Yes. Is that important? No.
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.