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The IRS wages war on open source nonprofits

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The IRS has denied one open source software company's request to become a nonprofit, using language that suggests it could do the same to the entire open source world.

I'm going to take the most controversial stance I have ever taken:

The IRS is a big bully.

(OK. Maybe that wasn't exactly controversial.)

We're all familiar with the ongoing controversy of the IRS targeting of non-profit organizations that are (potentially) affiliated with a political movement – most notably conservative ones. But one thing that has, until now, simply not gotten enough attention is the IRS targeting of Open Source non-profit organizations.

That's right. The IRS has, in essence, waged war against not-for-profit groups that make Free and Open Source software.

This week, it was announced that the IRS has officially denied Yorba's – an organization that focuses on Free Software such as Shotwell and Geary – request to be a 501(c)(3) non-profit. (You can read the full text of from the IRS here.) This could possibly be a one-time, specific case, one that may not even have any relevance to other organizations.

But the wording that the IRS chose to use in denying their status is deeply troubling.

“You have a substantial nonexempt purpose because you develop software published under open source compatible licenses that authorize use by any person for any purpose, including nonexempt purposes such as commercial, recreational, or personal purposes, including campaign intervention and lobbying.”

What this means: The IRS says that Yorba produces Open Source software that could be used by anyone. It is possible that a commercial company (aka “Not a non-profit”) might use that software, in some way, without Yorba's knowledge. Therefore, Yorba cannot possibly be a non-profit.

This same logic could easily be applied to Mozilla, GNOME and many, many others. Which is frightening.

The IRS also had this to say in its denial of Yorba's non-profit request:

“…public works must serve a community. Open source licensing ensures the Tools are accessible to the world. We have not found any authority for the proposition that the world is a community”

In order to be a non-profit, under the IRS's new “let's discriminate against Free Software” attitude, an Open Source-centric organization would need to:

  1. Restrict the geographical region that can gain access to the source code or the resulting software – perhaps only people in Pasadena, California, can get the software. That way it would be a community and, hence, be considered the “public” to the IRS. (Because the “whole world” is definitely not “public,” according to the United Stated Internal Revenue Service.)
  2. The licensing of the Free and Open Source software must restrict who – even within Pasadena – can use the software (or see the code). It could not be used by businesses (commercial). Or people having fun (recreational). Or... people (personal).

In other words, the only way (it seems) the IRS would be OK with Open Source software non-profits existing would be if the only possible audience for that software were kittens (sad, frowning kittens... because, remember, no recreational use) in Pasadena.

I wonder how long before the IRS starts revoking the non-profit status of existing Open Source non-profits...

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