IRS Looking at Google/Mozilla Relationship 261
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."
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.
Re:Link? (Score:1, Informative)
The Firehose story has the link:
http://www.linuxsolutions.fr/mozilla-has-irs-breathing-down-its-google-branded-neck/
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.)
Re:nothing wrong with corp. support for OpenSource (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:That's weird (Score:3, Informative)
Re:What makes Mozilla different? (Score:2, Informative)
For those looking into the "GAP" accounting methods mentioned, it is actually GAAP - Generally Accepted Accounting Principles [wikipedia.org].
Re:What makes Mozilla different? (Score:2, Informative)
A non for-profit is a different tax entity to a regular for-profit company. Even though it's mostly charities that are non for-profits (and thus people think that all non for-profits are feel-good), there's absolutely no legal association or expectation that a non for-profit is a charitable organisation - a lot are set up exactly like Mozilla - all the money is given to directors or plowed back into R&D. If you were setting up a business, and you were only in it for the money, didn't care that your business has no place to go once it became profitable and didn't need large capital injections to expand (eg. your product sells for an extremely high per unit compared to it's production costs and is an overnight success), then a non-profit is the best decision.
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.
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.
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.)
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.)
Re:nothing wrong with corp. support for OpenSource (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.
Re:Where's the smoke? (Score:2, Informative)
Perhaps Larry and Sergey are trying to write off donations to the Mozilla Foundation, and the IRS is examining if that's a bit too close to home.
Donations to some kinds of non-profits are deductible, but not all.
http://en.wikipedia.org/wiki/501(c) [wikipedia.org]
Moreover, it might appear to the IRS that the Mozilla Foundation is under the control of Google.
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 several restrictions and requirements on private foundations, including:
1. restrictions on self-dealing between private foundations and their substantial contributors and other disqualified persons;
2. requirements that the foundation annually distribute income for charitable purposes;
3. limits on their holdings in private businesses;
4. provisions that investments must not jeopardize the carrying out of exempt purposes; and
5. provisions to assure that expenditures further exempt purposes.
Re:Blame Microsoft (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 setup wizard to pick a "search engine provider" that my browser will automatically use every time.
when i open a browser, it's because i need to look for information or want to browse a certain site. if i want to change my browser preferences, i will go to the options dialog. it's incredibly annoying to have an unsolicited setup wizard shoved in my face. that's why i appreciate Firefox allowing me to surf the web unmolested. and instead of locking the browser into a single "search engine provider," Mozilla gives users a search tool that you can use if you want, or completely ignore and just search the web traditionally via search boxes on different sites.
besides, any time you install Firefox on a Windows system it'll ask you the first time you start the browser whether or not you want to import your IE browser preferences. when has IE ever asked if you wanted to import your browser preferences from Firefox?
Re:Blame Microsoft (Score:3, Informative)
And more about Apple: http://www.encyclopediadramatica.com/Apple [encycloped...matica.com]