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IRS Looking at Google/Mozilla Relationship
Posted by
CmdrTaco
on Thu Nov 20, 2008 08:45 AM
from the can't-imagine-why dept.
from the can't-imagine-why dept.
ric482 writes "With the release of the Mozilla Foundation's 2007 financial report, questions have been raised by the IRS, who are due to perform an audit on the non-profit organization behind the massively popular Firefox browser.
Last year, the Foundation received $66 million of its total $75 million revenue (88 percent) from search engine maestros Google, so the IRS are looking for blood over the organization's tax exempt status. Back in 2006, Mozilla got $59.5 million from Google — around 85 percent of the organization's revenue.
Google and Mozilla are part of a 'you scratch my back, I'll pay your bills' sort of agreement, with the Google search bar firmly placed in the toolbar, and on the default homepage. Things were a bit rocky a couple of months back when Google unveiled the Beta-run of its Chrome browser, but Mozilla and Google hugged it out and sealed a deal that will last for another three years. That deal will expire in November 2011."
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Blame Microsoft (Score:4, Funny)
Why not blame Microsoft? Maybe they filed a complaint with the IRS.
Unleash the conspiracy theories!
Re:Blame Microsoft (Score:5, Insightful)
but that's OK because it's the same company?
Exactly. The issue here is that Mozilla Foundation is a non-profit organization, but Google clearly is not. Presumably IRS could be interested in exactly how close ties they have.
Parent
Where's the smoke? (Score:5, Insightful)
Since Google is a profitable entity isn't this tax neutral to google? IE if Google and mozilla merged, and Google spent the same amount on development, and giving as mozilla does, google would have the same profit, and thus pay the same taxes. The only difference would be some of the last 15% (non google contributions.) Since individuals can write off gifts to Mozilla foundation, but not to google then that's the money the IRS is chasing, not googles portion of the pie.
Parent
Re: (Score:3, Insightful)
Re:Where's the smoke? (Score:4, Insightful)
But there really isn't any difference from a tax perspective if a business donates money, or spends it. It all comes out of net profits, and reduces the tax.
Parent
Re:Blame Microsoft (Score:5, Funny)
Exactly. The issue here is that Mozilla Foundation is a non-profit organization, but Google clearly is not. Presumably IRS could be interested in exactly how close ties they have.
Yeah, but doesn't Google qualify for tax-exempt status as a religious organisation?
Parent
Re:Blame Microsoft (Score:5, Funny)
I believe you are thinking about Apple [wikia.com].
Parent
Re:Blame Microsoft (Score:5, Interesting)
Parent
Re:Blame Microsoft (Score:4, Insightful)
Microsoft is a for-profit business with it's own search engine division and provides a product that could drive revenue to that business.
The Mozilla Foundation is a non-profit organization that provides financial support to the open source Mozilla project that has a product that drives revenue to Google in a deal inked where they have exclusive rights to being the default during installation in return for donating to the Mozilla Foundation.
I just don't see how the striking difference between those two scenarios could be more plain. I'll boil it down for those that can't:
Internet Explorer/Microsoft is a self-interest driven scenario.
Firefox/Mozilla/Google is a mutually beneficial scenario where one party is a business and the other is a non-profit.
As to how this answers your question--remember that Microsoft was convicted of being a Monopoly in the past. Neither Google nor The Mozilla Foundation suffers that burden.
Parent
Re: (Score:3, Insightful)
Re: (Score:3, Informative)
because Firefox isn't annoying. Firefox doesn't have a single "search engine provider." it knows that people often use more than one search engine. and if i want to change my homepage i can just go to Tools->Options.
if i want to add/edit my search tools i can go to "Manage Search Engines." or i can simply right click on the search box on any site i want and click "Add a Keyword for this Search" to add a search keyword. it's less intrusive and more convenient than being forced to go through some stupid se
Re:Blame Microsoft (Score:5, Funny)
> Why is it that Firefox has been out since my
> early college days
Because you're very young.
Parent
Re:Blame Microsoft (Score:5, Funny)
Why is it that Firefox has been out since my early college days
Why you young whipper snapper. I remember when Lynx and Mosaic first came out. When pages were all TEXT. And we LIKED it.
For that matter, I remember computers before any of this fancy "graphics" stuff was common. Before X. Before the Mac. Before Windows.
*grumble* firefox *grumble* young people *grumble
Parent
Laundering (Score:4, Funny)
The gig is up guys!
Google search bar? (Score:5, Interesting)
My version of Firefox just has a regular "search bar" that defaults to Google.
If I want another search, e.g., AbeBooks.com, I just change it to that. Does it become an "AbeBooks.com search bar" then?
Link? (Score:5, Insightful)
http://www.mozilla.org/foundation/documents/mf-2007-audited-financial-statement.pdf [mozilla.org]
nothing wrong with corp. support for OpenSource (Score:4, Insightful)
Re:nothing wrong with corp. support for OpenSource (Score:4, Insightful)
Parent
Re: (Score:3, Informative)
Marketing is not that big of a chunk (relatively speaking) at $6,332,459 (compared to $20,000,000 on development).
Re:nothing wrong with corp. support for OpenSource (Score:4, Insightful)
So, 72% invested, 6.7% in marketing, and 21% on development? Or, to put it another way, a third as much spent on marketing as on development? I can't think of many companies (big pharmaceuticals excepted) that have this high a ratio of marketing to product development spending.
It's probably not a bad idea that they're spending less than a third of their income, since it means that they can keep up this rate of expenditure during several years of economic down-turn irrespective of what their income does, but it does mean that, at the moment, only 21Â of every dollar that Google is paying to the foundation actually goes to improving the browser. With this in mind, developing their own browser probably made a lot of commercial sense.
Parent
Re:nothing wrong with corp. support for OpenSource (Score:5, Interesting)
Parent
Re: (Score:3, Interesting)
Isn't Epiphany using Gecko, Mozilla's HTML rendering engine?
It may be true that Firefox has kind of lost its way over the years, but you cannot deny it's popular success. And the mere fact that you mention that we should fork it, is testament to their open-sourceness, which is all it was all about in the beginning : have a browser that's better than IE, and that we can claim ours. In that respect, I think Mozilla is a resounding touchdown for the open source movement, and although technically inferior to to
parent is a troll (Score:4, Informative)
Note to everyone, parent is a troll, and the above statement is an outright lie. (I felt that I had to post this and point this out so people didn't get misled into believing that statement.)
Parent
Re: (Score:3, Informative)
...*who* exactly are making megabucks riding on the backs of developers? Mozilla is a non-profit foundation. There are no stock holders. NOBODY privately profits from the money generated by the Mozilla project. They pay salaries to employees, that's it. Noone is getting rich from it.
Soooo (Score:5, Insightful)
Re:Soooo (Score:4, Insightful)
Parent
Re:Soooo (Score:5, Interesting)
Or... They are just doing their job and investigating possible suspicious activities. If Microsoft did the same thing you would be all up in arms on how Microsoft is trying get out of paying more taxes. But Google with Mozilla, that has to be different. Innocent until proven guilty, they are investigating it as it looks fishy but that is.
Parent
Re:Soooo (Score:5, Insightful)
I've never really wondered that. The OEMs are buying Windows licenses in batches of several thousand, on a regular basis.
It's standard business practice to give discounts to customers who provide you with a large, regular, income.
Parent
Re: (Score:3, Insightful)
I don't see anything wrong with it either. There are many instances of charities doing these kind of partnerships. For example the red cross sells its logo to different companies. In fact Johnson&Johnson is suing the red cross for using the red cross trademark in the same market as they are (bandaids, first aid kits, etc.).
And I'm not a big microsoft fan AT ALL but I do see that you really can't condemn microsoft for bundling IE, WMP, etc. with their OS. It seems rather logical and their really isn't an
Why go after Mozilla? (Score:5, Insightful)
Re:Why go after Mozilla? (Score:5, Funny)
Parent
Wow (Score:4, Insightful)
Re: (Score:3, Interesting)
Using the money (Score:3, Insightful)
Shouldn't the IRS be more concerned about how is mozilla spending that money than where it comes from?
If a "save the children" non-profit organization changed their name to "Google saves the children" and Google donated $100 million, they should lose the tax exemption?
"Non-profit" isn't about how much money enters the organization but how much of it is used in pushing the agenda forward. If they're spending the millions of dollars to make a better free browser, they should still be tax exempt.
If they suddenly started using that money to buy sport cars for every programmer, they should pay taxes even if Google gave them just two dollars.
That's weird (Score:4, Interesting)
What do they plan to tax? Their revenues? Is it just that whenever there's money anywhere the IRS thinks uncle sam should get a share of it? Are they claiming that Firefox is some kind of tax shelter? I don't think that's the case. . .
How come there is no story associated with this summary?
Re: (Score:3, Informative)
Re:That's weird (Score:4, Informative)
As I recall, the problem is not a single source, but that it's a single corporate source. Certain classes of tax-exempt status requires a certain percentage of donations to come from individual contributions. This was a problem for the FreeBSD foundation about a year ago. They received a lot more corporate donations than they were expecting, so had to quickly raise a lot of individual contributions before the end of the tax year to retain their non-profit status.
The rules make sense, since if a corporation could be the sole donator to a tax-exempt organisation then every corp would just set up a foundation that received all of its profit, pay no tax, and have the foundation own all of its assets.
Parent
Another good reason to end corporate taxation (Score:4, Interesting)
The law is very rigid today. To start an organization, you have to jump through a lot of hoops and hurdles to be in compliance with everything from labor practices, to filing the right corporate status, to paying the right taxes. It would be a lot easier for society to find creative ways to reorganized itself if there were no corporate taxes.
Besides, corporate taxes are asinine. Not only are the costs transferred to the public in the form of higher costs and lost employment opportunities, most corporations have successfully figured out how to avoid paying most taxes anyway. It'd be better to just cut our losses, tighten up spending, and tax only individuals.
Re:Another good reason to end corporate taxation (Score:4, Interesting)
Parent
Counter thought (Score:3, Interesting)
I generally feel the same way you do. Companies are basically pass-through entities for personal spending and wealth, so why tax them. And from a philosophical point of view, corporations can't vote so why should they be taxed? We're a nation of people.
However I try to keep my mind open to challenge and I saw a recent argument the other way that was intriguing. Basically it made the point that since high corporate taxes penalize profit-taking, they force money to stay in the business, which drives improveme
Basically (Score:4, Informative)
Wow, that's a pretty slanted writeup by ric482...
Back in 2005, before the Mozilla Corporation was created as a for-profit organization, the deal with Google went through the Mozilla Foundation. There was worry that the income derived then would need to be reviewed by the IRS (a large part of the reason the Mozilla Corporation was created in the first place). Mozilla set aside a large part of that income in case that happened and the IRS would end up disagreeing with the status of that income.
The review of that income is basically happening now (and the IRS is probably also looking at what happened since).
Mitchell says it like this [lizardwrangler.com]:
(Lots of other interesting information in that blog entry, too.)
Solution to the economic crisis (Score:3, Funny)
The IRS seems to have the usual paradigm a bit confused.
1) Find one of the few sectors making a profit
2) Take them down
3) ????
Re:Solution to the economic crisis (Score:5, Funny)
If it moves tax it.
If it still moves, tax it more.
If it's stopped moving, subsidize it.
Parent
Nothing unusual (Score:3, Informative)
It's just a way to make sure one company (Google in this case) isn't using a charity (Mozilla in this case) for illegal purposes, like plain old tax evasion. If it comes to that, Mozilla simply needs to reduce the amount of money accepted by Google or rally the community to give a significant amount of money in the form of small individual donations, so the ration of Google vs others comes down.
If it seems hard to rally something that will rival Google's $66 million, a useful frame of perspective might be that the FreeBSD Foundation is working with several times the Mozilla's amount: http://www.freebsdfoundation.org/donate/ [freebsdfoundation.org] and they're managing to deal with it. (OTOH FreeBSD itself brings much money to the top donor companies so there's incentive to do it. Yes, FreeBSD developers are happy with this deal that comes from BSDL.)
Re:What makes Mozilla different? (Score:5, Informative)
Actually, having done bookkeeping for a 501(c)3 on a voluntary basis, I can say that there really aren't that many differences. Basically, a 501(c)3 is required to followed GAP accounting methods -- just as any other IRS-recognized corporation. They have to donate a certain minimum percentage of their annual income to charity. And they have to show that they are organized for the purposes which a 501(c)3 may be organized. Since a 501(c)3 is basically a 'miscellaneous charity status' with the IRS, this means pretty much anything that benefits the community or the greater good, except politics -- they can't directly or indirectly support a particular candidate or ballot initiative. (How non-profits often get around this is by saying "We don't endorse a particular candidate, but many of our members say they are voting for X." )
The important thing that IRS will be looking for is this: Is Mozilla money co-mingling with Google money? Are they keeping it separate? DOes it look like Mozilla is just a front for Google? And so forth. They'll do that by auditing the books, piling through receipts and conducting interviews with appropriate personnel. Mozilla as a non-profit can, believe it or not, sell almost anything. Selling things is not at all illegal for non-profit and actually 'making a profit' is not illegal -- the profit just has to go into a specific fund set aside for purposes that Mozilla is organized for. Such as, in this case, funding Firefox and Thunderbird development.
Parent
More than one kind of 501(c) nonprofit (Score:4, Informative)
501(c)3 is the most well-known because that is how charities organize themselves. But there are other kinds of nonprofits; for instance many of chambers of commerce are organized under 501(c)6, which allows more political activities.
Not related to the current discussion because Mozilla is a 501(c)3. Just making the point that "nonprofit" does not always mean 501(c)3.
Parent
Stop the Debian Bullshit (Score:5, Insightful)
Honestly, stop with the Debian bullshit already. Mozilla doesn't want others altering their software and still keeping their trademarks intact (which is what Debian wants to do). Debian places the *EXACT* same restrictions on their own trademarks.
Parent
Re:What makes Mozilla different? (Score:5, Interesting)
Generally speaking -- and I'm not specifically accusing Mozilla -- non-profit status is rarely what it seems. Usually the motivation in setting this status up is to avoid certain rules or taxes. It's only proper that this is investigated in Mozilla's case, if most of their income does come from a large highly-successful company.
The IRS should also be taking a very, very close look at Wikipedia. For those reasons, and also the fact that there have been individuals in that organization that have shady financial histories.
Parent
Re:Yea, microsoft is guiltless on this one too (Score:4, Insightful)
How on earth did you get modded insightful for that piece of fear mongering?
Mozilla knew this might be coming - they put money aside for this eventuality already in 2003. But nice try.
Parent
Self-dealing (Score:3, Informative)
I'm guessing that if the IRS determines that the Mozilla foundation is being operated so that there is significant self-dealing with their substantial-contributors (e.g., google), the mozilla foundation will likely get penalized for this. This would be like if microsoft contributed to a charity and that charity turned around and bought and excessive amount of microsoft software. Here's the IRS page on this subject.
http://www.irs.gov/charities/charitable/article/0,,id=96114,00.html [irs.gov]
In addition, there are sev