Mozilla Foundation Donations Now Tax-DeductibleFriday August 29th, 2003Via an arrangement with the Open Source Applications Foundation, donations to the Mozilla Foundation are now tax-deductible under IRC Section 501(c)(3) of the United States tax code. The Mozilla Foundation does not yet have the required certification for exemption under 501(c)(3) but OSAF does. Essentially, you send your donation to OSAF and they then pass it all on to the Mozilla Foundation. More information is available on the donations page. Ok, this is cool and all for those desiring write-offs on their donations, I thought under 501(c)(3) rules, it was illegal to specify that donations were to go to a specific party (other than the nonprofit itself), because it creates a potential loophole. i.e., donating to OSAF but specifying it is to go to Moz.org is not permitted. Or am I misunderstanding something? I hope I am, seriously. I'm no tax lawyer as it is (nor did I stay at a Holiday Inn Express last night). I'm no tax lawyer either, but as far as I know, this isn't illegal. Giving money to OSAF on condition that they gave to the Republican Party, or to Microsoft wouldn't be allowed, because OSAF wouldn't be able to justify giving money to those organisations within the purposes they exist for. As long as OSAF can satisfy their auditors and the IRS (or maybe the IRC, as the article says ;) that the Mozilla Foundation is spending the donations in a way that furthers the goals of OSAF, it's ok. AIUI. IANAL. etc... THere are explicit rules in the tax code about how donations may be gien and dispersed. I know that one such rules prohibits direct funneling in certain circumstances. I can't donate to the Salvation Army and dictate that they then donate that same amount of money to Bob next door, as that could be a tax free method of exchanging simple payments (avoiding taxes). As I said, I'm not sure the exact details as to when direction of funds is and isn't illegal, nor how this works, merely bringing it up as something to be careful of and think about. Firstly, sec. 501(c)(3) just makes the charity itself tax-exempt and does not mention the deductibility of contributions. The deductibility of contributions is from a completely different subchapter, in sec. 170(c). It's just that the two sections happen to describe mostly the same organizations. Mozilla.org describes OSAF as acting as its "fiscal agent." Since the funds are, in substance, donated to it, merely passing through OSAF's hands, it is not proper to claim the sec. 170 deduction for these contributions. Moreover, OSAF is putting in jeopardy its own qualification for sec. 170(c) and 501(c)(3) status. And, normally, deductions for donations to an organization previously recognized as qualifying under sec. 170(c) do not put the donor at risk, but that does not apply to donors who participated in the disqualifying acts. If you claim a deduction for these donations, you are probably committing tax fraud. Yes, IAAL. The use of fiscal agents is quite common in the non-profit world. While both Mitchell and myself are lawyers, we of course consulted with an account and an expert in this matter before structuring things this way. So thanks for your concern, but don't worry. If you make donations to the Open Source Applications Foundation and earmark them for the Mozilla Foundation, all the money will go to us and your donation will be tax deductible to you. If you prefer to make your donations directly to the Mozilla Foundation, you may also be able to claim a tax deduction, but it's quite possible that, come tax time, the IRS will not yet have ruled that it will not challenge that deduction, so in that case you are taking some risk. Therefore, I don't recommend this approach. Cheers. The use of fiscal agents is quite common in the non-profit world. While both Mitchell and myself are lawyers, we of course consulted with an account and an expert in this matter before structuring things this way. So thanks for your concern, but don't worry. If you make donations to the Open Source Applications Foundation and earmark them for the Mozilla Foundation, all the money will go to us and your donation will be tax deductible to you. If you prefer to make your donations directly to the Mozilla Foundation, you may also be able to claim a tax deduction, but it's quite possible that, come tax time, the IRS will not yet have ruled that it will not challenge that deduction, so in that case you are taking some risk. Therefore, I don't recommend this approach. Cheers. IRC->IRS? If you follow the IRC link, it goes to the IRS page but mentions IRC all over the place. Looks like they're using the correct acronym IRC = Internal Revenue Code |