Re: [gentoo-nfp] Re: [gentoo-project] Questions for Gentoo Council nominees: Gentoo Foundation - Treasurer Response! (part 2)

[Robin H. Johnson]

(Apologies to the -nfp list, but I missed sending this to both -nfp and
-project the first time, and since it concerns the Council election, I
felt it important enough to resend. If everybody else could try to
include a header containing
Reply-To: gentoo-nfp@l.g.o, gentoo-project@l.g.o 
in the thread, I think it would help overall)

On Wed, Jul 03, 2019 at 10:41:36PM +0200, Michał Górny wrote:
> > > The fees remain the same for a c3 (1500 per year).  We've talked to the
> > > Accounting firm about our options in attaining c3 status.  There are a
> > > couple of ways we could go about it.  Filing fee remains the same (~1k
> > > iirc) for all options.
> > >
> > > 1. fix all back taxes (10 years) then refile, this would cost 9k more
> > > for the back taxes alone (4 years was recently approved).
> > >
> >
> > Plus $15000 in CPA fees, correct?  Or do we assume a different fee for
> > that part?
> >
>
> Ok, Matthew corrected me on IRC.  He meant $9k of CPA fees for
> the remaining 6 of 10 years.
In my previous email, "Motion: approve preparation costs for tax filings
FY2016-FY2019", I covered my estimate of the
taxes/interest/penalties/fines that I expected for the FY2016-FY2018
periods (a total of USD9,300.00, on top of the preparation costs of
USD4,500 for those 3 years; the Motion included FY2019 that I omit
temporarily here).

For the further 6 years back:
- Preparation: 6x USD1500 = USD9,000.00
- Taxes/Interest/Penalties/Fines: USD16,000.00
Which gives a total of USD 25,000

The comparison quote from Corporate Capital, for preparation & legal
costs, to create new 501cX for Gentoo, is USD 2,500.

This doesn't include the filing fees, which prometheanfire estimating
around USD 1,000, but would vary greatly depending on which state we
filed in. I think that estimate might be as high as USD 2,000.00
depending on other states, with further traps of ongoing costs (Some
states effectively have state or local taxes even on NFP incomes)

The order of operations for the new org would be approximately:
- prepare state-level filings to start a new NFP
- file to state & wait for response
- file to IRS, initial stuff
- wait N years [depends on the exact NFP structure]
- file to IRS, later stuff

I do agree that the wind-up of the old 501c6 could happen in parallel,
with the donation made to the new entity

Another short-term reason AGAINST our own 501c3 are the donation
structure requirements, that are meant to ensure a diversity of donors.
FreeBSD ran into this in 2004:
https://web.archive.org/web/20050112120244/http://www.freebsdfoundation.org/press/20041221-newsletter.shtml
"The FreeBSD Foundation's 501(c)3 Status"

The Gentoo Foundation DOES presently have one large cash donor, who
would presently cause us to fail the 1/3rd test.

The proposal of doing a large donation from the old Foundation to a new
Foundation could ALSO violate the 1/3rd test, so doing the donations
over time might be needed (I'd literally start taking new donations, and
at the end of every month, have the old foundation make the maximum
possible donation that wouldn't violate the 2% clause on the 1/3rd
test). The old Foundation would also continue to pay expenses out of the
accounts, to reduce the need to shift amounts over.

-- 
Robin Hugh Johnson
Gentoo Linux: Dev, Infra Lead, Foundation Treasurer
E-Mail   : robbat2@g.o
GnuPG FP : 11ACBA4F 4778E3F6 E4EDF38E B27B944E 34884E85
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