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To: Alistair Bush <ali_bush@g.o>
From: Matthew Summers <quantumsummers@g.o>
Subject: Re: Tax return and accounting discrepancies
Date: Fri, 25 Mar 2011 16:21:52 +0000
On Fri, Mar 25, 2011 at 7:36 AM, Alistair Bush <ali_bush@g.o> wrote:
> <!-- snip -->
>
> Mathew,  I would like to thank you for the work you are doing.
>
> I know absolutely nothing of how the IRS operates so hopefully these questions
> are appropriate.
>
> When you state that there will not be "serious consequences",  is this
> personal opinion or based on law/irs policy.   I would assume that IRS would
> have the power to confiscate all assets of gentoo and "close us down" in the
> worse case.  Would you be able to give an indication of what "serious
> consequences" might entail.  I'm assuming it will be a financial penalty that
> we are currently able to afford.  Your personal opinion on this is sufficient but
> if you can give a range (ie < 5000) it would be apprieciated.
>
> Also, is there any visibility on the steps that need to be completed and
> estimated timelines for when each step may be completed.  I realise that
> timelines could be very difficult to give and even harder to meet but it seems
> very important that we do.  Would it be possible to allocate funding to speed
> this process along. where is the bottleneck? is it us?  the US mail service?
> IRS/Goverment Bureaucracy?
>
> Thanks
>
> Alistair.
>

Alistair,

First, thank you for your well considered email.

The statement regarding consequences derives from consultation with
attorneys and CPAs specializing in non-profits. What I would consider
serious in this case would be jail time, asset confiscation, and/or
other criminal penalties. My consultants have lead me to believe that
we are not in danger of these sorts of consequences. This is
predominantly due to the fact that we have income below the minimum
and we have no employees, nor do we pay any contract personnel for any
work. Further, we are more than willing to be fully transparent to any
auditors, and have nothing to hide. This is to say, there has been no
wrong doing or criminal behavior in the history of the organization to
the best of my knowledge.

We have been fortunate thus far in that the IRS has not actively
sought to investigate or audit the organization (however I want a
complete audit, just not by the IRS, but this has been nearly
impossible given the absence of documentation prior to 2008) . I hope
that no rash action by anyone on this list would provide encouragement
for the IRS in seeking an investigation or audit before we have the
opportunity to establish proper status. As I had previously stated,
this is a delicate situation right now, and I am working as fast as I
can to set things aright, however these things take time and some
money. I have been lead to believe that we may, in the worst case, be
subject to monetary penalty by the IRS, however since our income has
been so small (relative to other organizations), we may not be subject
to any large fines. In terms of a range, it is really difficult to
estimate appropriately. I will defer this to my CPA, with whom I will
meet again regarding these items in early April (prior to the 15th, of
course). I will provide a full report to the board at during the April
meeting.

As far as visible steps that are available to us at the moment, I am
working with a local CPA specializing in non-profits to assist in
handling our filings for the moment. Since my name is legally
associated with the Foundation, as the signatory officer, I have
knowingly accepted full responsibility and legal obligation. I am also
gathering quotes from CPAs across the country, based on
recommendations from various non-profit directors with whom I have
personal relationships, in the hope of identifying the most cost
effective means of obtaining the long term support the Foundation
needs going forward. This will require an allocation of funds, and yes
the other board members are aware of this. I believe we have
sufficient funds to secure the required professional support. I think
the dominant reason we need to contract a professional is the simple
fact that with a contract we have greater accountability and legal
recourse available, whereas with volunteers we do not have that. At
some point in the near future I believe a composite of professional
and volunteer support will be possible, and this will be a good thing
when the time comes. Now is not that time. Now is the time for
professional assistance and support.

In terms of the bottlenecks, there are a few. For one, it has been
impossible to conduct an appropriate financial audit for the period
prior to 2008. The records are simply unavailable to the best of my
knowledge. Further, the original bank was purchased by another entity
and we were only able to recover the funds from that previous account
last year. Thankfully we were successful in recovering those funds as
it was a good amount of money. We are all indebted to Mr. Joshua
Jackson for his persistence in that matter. Additionally, we have no
idea what paperwork, if any, has been filed with the IRS prior to
2008. There is some indication that the Foundation and/or D. Robbins
was attempting to solicit donations to fund the application costs for
Gentoo to become a 501(c)(6) trade organization, but we have no idea
what became of that. We need some, if not all, of this information to
satisfy the reporting requirements of the IRS since we are well past
the 27 month filing 1023 form deadline. This deadline was passed in
late 2006, so its been a long time ago. Regarding the 1023 form, I
have completed the components that I was able to. We were working with
the SFLC to handle the requirements to satisfy the late filing.
Unfortunately they have not been able to provide this material after
one year. Hence why I am now turning to familiar local resources for
this support. This was discussed at the last board meeting, as well as
general status, etc.

I will keep everyone posted on all pertinent developments. I really
appreciate the interest and well reasoned questions. Gentoo is very
important to a whole host of people, and we all want its health to be
maintained and provide for its growth and future. I promise to
continue to do my level best in this endeavor.

Kind Regards,
Matthew Summers
-- 
Matthew W. Summers


Replies:
Re: Tax return and accounting discrepancies
-- William L. Thomson Jr.
References:
Tax return and accounting discrepancies
-- William L. Thomson Jr.
Re: Tax return and accounting discrepancies
-- Rich Freeman
Re: Tax return and accounting discrepancies
-- Matthew Summers
Re: Tax return and accounting discrepancies
-- Alistair Bush
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