Re: [gentoo-dev] OT Who runs Gentoo was -> RFC: Userkit.eclass

[Rich Freeman]

On Sat, Dec 3, 2016 at 5:09 PM, William L. Thomson Jr.
<wlt-ml@××××××.com> wrote:
> There is also the charitable donation and write off aspect. Which they may be
> able to do. But since Gentoo has never received official 501c6 status or any
> from the IRS. I am not sure if companies or anyone can actually write off a
> Gentoo donation. May be moot for individuals, but not for large businesses
> with stringent accounts and standards to meet.
>

Actually, it is the opposite.  When you spend money as an individual
in the US it normally doesn't lower your taxes unless there is some
special tax deduction for it, such as the mortgage interest deduction.
One of those deductions is donations to 501c3/etc status.  So, there
is a benefit to an individual when donating to a 501c3 organization
(or other deductible classes) because it lowers their tax burden.

On the other hand, businesses are only taxed on their profits at the
federal level.  So, if a business takes in $500 and spends $400 then
it is taxed on $100.  That $400 could be spent on almost anything as
far as I'm aware.

So, money given to Gentoo by a private business is the same as money
spent on toilet paper or money thrown in the furnace as far as tax
liability goes.  It increases expenses which means it decreases
profits.

Now, where 501c3/etc status does start mattering for businesses is
internal compliance controls.  Most publicly traded companies have
standards for how money can be spent, because that money belongs to
the shareholders.  I work for a publicly traded company and I can't
just treat myself to a new car and expense it, because that deprives
the shareholders of their profits, even if the US government wouldn't
otherwise have a problem with it from a tax perspective (as long as I
declare the value of that car on my own taxes as income).  In order to
keep things simple companies often use 501c3 status as a requirement
for donations.  This eliminates debates about whether a particular
cause is or isn't a valid charity to donate to for the purposes of
goodwill/etc because the IRS acts as an unbiased filter.  501c3 also
implies financial controls on how the money gets spent, so there is
less of a risk that somebody is directing money towards a recipient
who ultimately is going to offer some kind of kickback, because that
would be illegal for the 501c3 and the IRS would enforce that (from a
tax perspective the kickback probably isn't illegal for the original
donor company, but from a shareholder responsibility standpoint it is
a misuse of funds for employees to basically be giving money to
themselves).

So, if your goal is to be the beneficiary of corporate philanthropy,
then I'm sure 501c3 status will help.

Another source of donations might be other 501c3 foundations.  The FSF
might give money to a FOSS-only linux distro, for example.  In such
situations they're almost always going to donate purely to other 501c3
organizations, because they need to ensure the money is spent on
charitable purposes to meet their own IRS requirements.

Now, companies probably also make investments that aren't intended to
be philanthropic.  A company might give money to a trade association
in exchange for some kind of benefit, or it might just give money to
an association to support their which which somehow benefits the
company.  I suspect a business that benefits from Gentoo more directly
probably wouldn't care so much about the tax-exempt status because the
donations are being justified on the basis of being a business
investment of sorts.

So, yes, the status matters, but not actually for tax reasons
themselves in most cases.  It is more of a marker of how the money
gets spent.

I used the term 501c3 just to keep this simple, but there are other
classifications in the tax code which could also apply to an
organization like Gentoo and generally be treated similarly.

If somebody is a corporate tax accountant and wants to offer a finer
explanation it is welcome, but this is the gist of it as I understand
things.

-- 
Rich