Re: [gentoo-nfp] Questions For Gentoo Foundation Trustee Candidates

[Robin H. Johnson]

On Sun, Jul 14, 2019 at 10:32:29AM -0400, Aaron Bauman wrote:
> > Before the vote is undertaken, extensive research with comparative costs
> > should be prepared. They should include costs of ongoing state, costs to
> > being an Umbrella member, costs to joining the umbrella (e.g. many of
> > the options will need to pay for trademark & copyright [1] transfers).
> >
>
> This has been discussed amongst the trustees for a bit, but no one has pursued
> their research of the umbrellas. It is important to note that those supporting
> such a course of action should conduct this research. No, this is not a matter
> of "due diligence" for members of the baord who do not support such a move to
> undertake.
All of the prior research needs to be collected into one place. This
includes trustee discussions with Umbrellas (including my own
discussions about finances with SFC & SPI), as well as council
discussions, and non-council-non-trustee discussions (there was at least
one dev that approached an umbrella directly).

This includes all of the ongoing costs that we have, as well as any
costs that would be incurred in various transition states:
- dissolution
- reformation of new nonprofit of different types
- as members of an umbrella nonprofit

I didn't volunteer you to research the costs of the umbrella itself, but
I did ask your help in costs that would be incurred in other situations.
E.g. your hypothetical 501(c)(3) org would still need the trademark
transfers, as well as paying for book-keeping & tax preparation
services.

> > Question 1:
> > - Should the Foundation do voluntary OPTIONAL backfiling to the IRS?
> > Yes, No
> > This is the filing beyond the present 4 years that we are presently
> > required to do. If the outcome of a later question makes it mandatory,
> > then we'd be doing it anyway.
> I am not sure why we would propose this to the general membership? This is a
> matter for those elected to consider. Of course, the general membership should
> be notified of how these things are being handled, what the significance is, and
> how each course of action was considered.
Intent matters here. If you have a voluntary filing, what do your
personal code of ethics say about it? "Always do every optional thing"
vs "do only what's actually required"

> > Question 2, ranked choices:
> > What do you feel should be done with the Foundation entity? If an option
> > turns out to be disallowed by law, it will be discounted after the poll.
> > I'm not certain all of the options will be possible, but I want to be
> > open in possibilities.
> >
> > - Remain a for-profit entity
> "remaining" a for-profit entity is antithetical to the original intent and
> purpose of the foundation. While there were failures of individuals to file the
> appropriate federal tax paperwork to gain tax-exemption status, this does not
> change how we should proceed nor set a precedent for "remaining" a in a
> for-profit status.
It's entirely possible to exist as a legal for-profit entity, but
operate entirely under non-profit principles, with the caveat that
you're being "good" and paying tax even when you could be exempt, and
that any donations you receive are entirely voluntary and the donors
cannot claim charitable contributions for them (I expect somebody might
accuse me of being a socialist with this description).

Article III of Incorporation:
"The Corporation is organized and at all times shall be operated, on a
non-profit basis ..."

> > - Apply to convert from for-profit to non-profit 501(c)(3)
> This is dependent on filing the additional 6 years.
No, it doesn't require filing the 6 years.
The CPA stated that the IRS _might_ decide to require the 6 years after
the initial filings, and that the CPA's specific advice was to NOT
initially file those further 6 years.

> > - Apply to convert from for-profit to non-profit 501(c)(6)
> We have discussed this before, a 501c6 does not match our purpose, does not
> support charitable donations being tax-exempt for the donator, and we have no
> intent of lobbying/supporting politics.
>
> The 501c6 idea justs needs to go away.
The charitable donations only really apply for tax residents of the USA.
Very few countries permit cross-border charitable donations like this
(Canada for example permits it only if you earn a US income or the
recipient is certain universities).

For the FY2019 that just closed, as a quick analysis, our paypal gross
donations is approximately USD 15400.00. Of that, at least USD 9000 came
from non-US sources.

Lobbying is a broad definition: encouraging usage of Gentoo can be
construed as Lobbying.

At a broader level in IRS definitions:
501(c)(3)
Operated exclusively for charitable, educational, religious, literary,
or scientific purposes
501(c)(6)
Operated to promote a common business interest, and to improve business
conditions in the industry

Is Gentoo Linux a:
- charitable purpose: no
- educational purpose: no
- religious purpose: no
- literary purpose: no
- scientific purpose: no
- common business interest: YES

It's on this basis that the IRS has denied 501(c)(3) existence to other
organizations who produce "general purpose software". The Open Source
Institute HAS written about this before in depth:
https://opensource.org/node/840

Also please strongly note their closing:
"Any FOSS project considering whether to incorporate or to apply for
tax-exempt status should seek the advice of an attorney experienced with
the laws and regulations applicable to exempt organizations."

> > - Dissolve the existing entity AND create a new non-profit 501(c)(3)
> > - Dissolve the existing entity AND create a new non-profit 501(c)(6)
> > - Dissolve the existing entity AND Join Umbrella: Software in the Public Interest (SPI)
> > - Dissolve the existing entity AND Join Umbrella: Software Freedom Conservancy (SFC)
> > - Dissolve the existing entity AND Join Umbrella: Linux Foundation (LF)
> > - Dissolve the existing entity AND Join Umbrella: ... (list of every umbrella that is compatible with us joining)
> > - Dissolve the existing entity AND donate the assets to some non-profit
>
> I am not sure why we would even consider dissolving the foundation with a
> follow-on action of donating the money elsewhere. While I support donations to
> similar non-profits, the money currently held by the foundation was raised under
> the premise of supporting Gentoo.
Raised under that premise is different from being restricted to that
purpose by law. We have no donor-restricted funds as recognized by the
IRS [1]. I can speak canonically on that, as the Treasurer, and required
to keep track of any fund restrictions.

[1] https://www.investopedia.com/terms/r/restricted-fund.asp

> How that that grew to $100k is troubling...
This option was intended as a nuclear variant, for those in the
community that think the Foundation should just "go away (TM)".
I certainly don't support it myself, but I feel it's important to gauge
what the electorate think of it.

> > - Reopen research & voting
> >
> > Question 3:
> > As required by New Mexico law, do you approve of the trustees dissolving
> > the existing Foundation, to change per question 2?
> > Yes, No
> >
>
> The dissolution proposal needs to come from the Trustees and be:
>
> 1. direct with purpose (e.g. we will go under an umbrella)
> 2. a well laid out plan to inform the membership of where
> assets/trademarks/monies will go
>
> Asking the general membership to support a dissolution with multiple endstates
> is not proper or responsible.
The two questions can be reformulated:
- do you support the dissolution of the Foundation
  - NO => fix existing entity
  - YES => see next question
- what should the outcome of the assets be? (new
  nonprofit, umbrella, donation to nonprofit)

>
> > > 2. Will all candidates explain the reasoning supporting their position
> > > on their future plans for the existence (or otherwise) of the Foundation.
> > On the above questions, my answers:
> > Q1:
> > No voluntary backfiling [I don't have the time for it, another person will need to work with the CPA on it]
> >
>
> Unless I am missing something here, the intent is to retain the CPA for such
> book keeping permanently. The trustees will simply interact with them to make
> purchases etc.
>
> e.g. buy a thing, send receipts to CPA.  Done.  This is not complex, as they
> crunch the numbers.
The CPA is not a book-keeper. We have retained the CPA for tax
preparation services ONLY. 

We could pay to retain book-keeping services (>$200/month), keep trying
to do it ourselves, or it would be done by the Umbrella.



>
> > Q2:
> > - Dissolve & join SPI
> > - Dissolve & join SFC
> > - Dissolve & join LF
> > - (maybe other umbrellas here)
> > - Convert to 501(c)(6)
> > - New 501(c)(6)
> > - Reopen research & voting
> > - (all other options)
> >
> > Q3: Yes
> >
> > Why these choices?
> > As the others have noted, even with the present manpower, we have a bus
> > factor problem. If I wasn't around doing the financials, we'd be in much
> > worse state. Not that it would be impossible to fix, just significantly
> > more expensive (one rough book-keeping quote to "fix" data was $250 per
> > calendar month of backlog, including end-of-year financial statements).
> >
>
> As I stated above, the CPA should be retained by the board. Also, "expensive" is
> relative considering the current state of the foundations finances. We have
> money... lots of it relative to our needs.
If the book-keeping costs $250/mo, and tax preparation is $1500/year,
that's already $4500/year just for preparation, before any filing costs.

Our gross income on leaner years is around $15000/year, so we'd be
spending nearly a third of our income just on preparation costs.

> > To that end, I feel we should offload the work to an umbrella as much as
> > possible, that is ALREADY handling the type of stuff we want to do for
> > other open-source projects.
> Let's pretend the CPA is that umbrella?  This is an important distinction as
> many are presenting umbrellas as a panacea, but are failing to understand (as
> Roy pointed out in another thread) the potential impact of *another* board
> impacting Gentoo in a way we may not agree with. This is possible through the
> same by-laws and Articles of Incorporation from umbrella $X.
>
> *No*, a contract will not fix this.
Why not ask other large projects if they feel that belonging to an
umbrella has impacted what they can do? 
Git under the SFC, Debian under the SPI, or any of the other members in
large umbrellas. It matters a lot here what the umbrella is. That's why
I don't personally feel that the Linux Foundation would be a good
Umbrella for us to join.
SPI & SFC on the other hand have a much better understanding of what
Gentoo's nature is.

> > The exact Umbrellas we might join are another matter for debate. I think
> > the Linux Foundation has the most corporate power, but I'm not as
> > certain of their motives as SPI & SFC.
> How have you found certainty in their motives?
The Linux Foundation's bylaws are 501(c)(6) and pay-for-voting-rights.
SPI & SFC are 501(c)(3) with focus on the actual projects.

-- 
Robin Hugh Johnson
Gentoo Linux: Dev, Infra Lead, Foundation Treasurer
E-Mail   : robbat2@g.o
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