A few hours ago Timothy Geithner was sworn in as the Treasury Secretary for the United States of America. Among his many duties he will oversee the Internal Revenue Service which oversees arcane sections of the tax policy such as granting 501(c)(3), non-profit, status. Over the last several years the IRS has quietly been denying non-profit status to open source projects.
Many people in the open source community are surprised by this because because they have come to know several open source projects which do have non-profit status. My understanding is that most of those projects received their non-profit status prior to 2004.
Drupal is one of the most popular web content management systems in the non-profit sector, and many people who've crossed over from the non-profit world are shocked to find out the ease with which they received non-profit status for their faith, advocacy, or arts group does not apply to open source projects.
I began the process for applying for non-profit status in 2005 when we began the process for CivicSpace Labs, a Drupal based distribution targeting advocacy and non-profit groups. At the time we were told there were two objections to granting non-profit status. First, there was concerns by proprietary vendors that companies would create unique application code bases under a non-profit organization and then sell the software bundled with a proprietary stack. The result would be some companies were in effect getting an open source tax-credit for their effectively proprietary software.
The second objection was that the firefox browser, an open source project from the mozilla foundation, was earning record income through their default search engine agreement with Google.
With a change in administration we might find that the granting of non-profit status for open source projects could change. If you are currently applying for non-profit status for your open source project, or have recently been rejected non-profit status for your open source project please let us know.
The Drupal association is a non-profit based in Belgium.
