Re: [gentoo-project] Questions for Council candidates: Future of the Foundation

[Alec Warner]

On Sat, Jul 4, 2020 at 2:44 PM Rich Freeman <rich0@g.o> wrote:

> On Sat, Jul 4, 2020 at 12:33 PM Andrew Savchenko <bircoph@g.o>
> wrote:
> >
> > This is one more aspect to this: some companies double donations
> > for 501c3 organizations. A friend of mine works in a large
> > corporation with HQ is the US and told me that his employer doubles
> > any donations made to 501c3, so he made no donation for Gentoo,
> > because that will mean loosing money for community which otherwise
> > can be doubled. So it is likely that 501c3 will increase incoming
> > donations.
>
> That is a really good point and I'll expand on this.
>
> Some organizations will only donate money to 501c3 organizations.
> Basically they're letting the IRS do the due diligence around whether
> the organization is actually charitable.  They can potentially also
> receive tax benefits this way.
>
> If you want to receive grants/donations from other 501c3 organizations
> you will be far more likely to get them if you are yourself a 501c3
> organization.  These transactions receive far less scrutiny than
> transfers from 501c3s to other types of corporations.
>

This can be problematic for us in some cases.

Currently our annual revenue is approximately 10,000 (All USD in this
example.) If we are a 501c3 public charity, we are required to source 1/3rd
of our revenue from the public; and the public is determined by a complex
set of rules. Generally this is "donations less than 2% of gross receipts."
So e.g. in our current funding model, 2% of 10,000 is 200$; and we need to
gross at least 3,333$ in donations < 200$. I can tell you the Gentoo
Foundation easily passes this test[0]. However, if we were to be a 501c3
and suddenly donations increased, when do we need to start worrying?

For example; assume gross receipts tripled in the new system, to 30,000$.
Now we need 1/3rd of this new total (10,000$) to come from donations less
than 600$ (2% of 30,000$). Plugging in our 2019-2020 data, our support
level here is not sufficient[1] and we will fail the public support test.
Obviously the real numbers would be different but we might want to be
careful in terms of how we tell people to donate and how we account for
donations[2].

For example if I donate X and my employer donates X, I assume that counts
as 2 donations (not 1) and we can influence the recommended value for X
(e.g. we want X to be less than 2% of of expected gross revenues for that
year, so it counts toward public support for the majority of donations.)

The other challenge is that we have no actual plan for spending money.
Feedback from the community has not been very positive when I have tried to
engage with them on how to spend the money. This presents an ethical
problem in terms of raising funds we have no existing need for; the
existing public donations from individual contributors already exceed our
expenses by a fair margin. I suspect in addition to moving to a tax-exempt
non-profit we would need clearer guidance from the community on how to
allocate the potential increase in revenue.

-A

[0] Non-exhaustively our public support is about 60% using the 2019-2020
numbers.
[1] This isn't shocking, the new total is 10,000 and we don't always reach
10,000 in donation revenue..but I bring it up to demonstrate a concern that
a few donors of large amounts can outpace the public support the public
charity otherwise needs to operate legally.
[2] This example is again meant to be demonstrative; the rules around this
are nontrivial and I've simplified quite a bit for mailing list purposes.


> --
> Rich
>
>