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."
Blame Microsoft (Score:4, Funny)
Why not blame Microsoft? Maybe they filed a complaint with the IRS.
Unleash the conspiracy theories!
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This would be the Microsoft who have a Browser that has an MS search bar embedded ... but that's OK because it's the same company?
Perhaps they should look at the Bill and Melinda Gates foundation, it gets all it's money from one source ....?
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.
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.
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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.
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Since Google is a profitable entity isn't this tax neutral to google?
If Mozilla loses its tax exemption then Google would have to contribute a lot more to give the same amount of money.
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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.
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?
Re:Blame Microsoft (Score:5, Funny)
I believe you are thinking about Apple [wikia.com].
Re: (Score:3, Informative)
And more about Apple: http://www.encyclopediadramatica.com/Apple [encycloped...matica.com]
Re:Blame Microsoft (Score:5, Interesting)
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.
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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.
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
Laundering (Score:4, Funny)
The gig is up guys!
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I smell fish.
Does the IRS investigate other tax-exempt nonprofits that get large contributions from corporate donors? WHY are they investigating Mozilla?
I guess I have to RTFM.
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?
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Yes, because you'd be searching AbeBooks when you typed in it and pressed enter.
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My firefox defaults to Scroogle, a google search proxy, without all of the IP logging hassles. [mozdev.org]
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"but also noted is that over 88% of users will never change default settings"
Don't forget that Google is running at least 80% of the search market, and was before Firefox came onto the scene.
Google is paying them for something that, when looked at from a "what default settings make the most sense for the end-user" point of view, is already the most obvious option. I mean sure, they could set it to Ask.com or Yahoo!, but then they'd just have people asking if they can change it to Google anyway.
Link? (Score:5, Insightful)
http://www.mozilla.org/foundation/documents/mf-2007-audited-financial-statement.pdf [mozilla.org]
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nothing wrong with corp. support for OpenSource (Score:4, Insightful)
Re:nothing wrong with corp. support for OpenSource (Score:4, Insightful)
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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.
Re:nothing wrong with corp. support for OpenSource (Score:5, Interesting)
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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
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Epiphany does use gecko, but there is also an experimental version that uses webkit.
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.)
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...*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.
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Actually I think Moz is a friend of the community, it is the most popular chunk of OSS around, and thus serves as an example of its power. Yes, it also is a money juggernaut, which makes OSS more attractive. Thanks to that money, Firefox is right now the most polished OSS product out there as well (perhaps tied with Ubuntu).
So, why isn't Mozilla a god guy anymore? The gobs of money? The fact isn't not a basement hobby with the UI of nightmares? That it isn't the communities baby anymore?
Soooo (Score:5, Insightful)
Re:Soooo (Score:4, Insightful)
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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.
Not innocent until proven guilty (Score:2)
It's guilty when proven guilty, and MS have been found guilty enough times, in and out of court.
Convicted abuser of a monopoly position
Breaking windows for competitors products
Holding back on interopability docs
Special funding related to the SCO debacle
GPL is "viral"
Claims like "Linux breaches loads of our patents"
etc etc
Sam
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.
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.
More like tens of thousands, hundreds of thousands. Netbooks are perhaps 10% of the laptop market with 10 million sold this year.
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So, collectively, only tens of thousands of computers get sold every year?
WRONG.
Hundreds of thousands of licenses are sold to all the OEM mfg's collectively. Even your OWN post points to that.
--Toll_Free
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The thing about OEM Windows licenses is that the OEM agrees to provide all support for that install. If you purchase an OEM machine, you can't call up Microsoft support. If you purchase a retail version, you can (though the difference is really minimal in most user cases and usually only involves a few calls).
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Or it's volume licensing.
I bought three Dodge 3500 Dually Cummins Turbo Quad Cabs back in 2006. Sticker price for all three was $165,000.00 US Dollars.
I didn't pay NEAR that, as a volume purchaser. Companies like Budget, Avis, etc. (rental companies that purchase literally THOUSANDS of cars) pay BELOW retail, almost at cost (or sometimes below) because of volume licensing as well as the car companies KNOWING that if someone rents a Mini Van, they might just purchase one (that's what I did, rented one for
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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
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They're looking at the big chunk of cash Google gave them and trying to find a weasel way to say that it was Google paying them in exchange for "bundling" the search bar. It's semantic bullshit, but the IRS thinks they might be able to get money out of it, so they're going for it anyway. The IRS is worse that patent trolls.
Yeah, and I'm sure the google search bar would be the default in the case of Google not spending another dollar with Firebird, huh? Mosaic wouldn't be going to another company looking for money.
That whole default search thingy was just a fluke.
BULLSHIT.
Google pays them to be the default search engine. Don't think so, look at the stink in the archives about Google NOT being the default in Opera, instead going to Ask.com.
--Toll_Free
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Many non-profits have one of these [wikipedia.org].
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So, how much taxable profit did the Mozilla foundation make anyway? The IRS has nothing to gain from this. I smell a rat closeby!
But Google *is* for profit. And Google arguably paid for Mozilla to put in some "branding" in the form of a default Google homepage and a Google search bar. If Google had paid that money to a for-profit entity, the for-profit entity would have had to pay tax on it (if they were profitable that year). Mozilla gets out of paying corporate income tax because they ostensibly do what they do for the common good. If they are doing things that solely benefit their big contributors, that calls their tax exempt
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Yeah, you have a good idea.
Remove corporate income tax. Let the common people shoulder it.
--Toll_Free
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They give away the browser and spend all of their revenue on development. So, how much taxable profit did the Mozilla foundation make anyway? The IRS has nothing to gain from this. I smell a rat closeby!
Profit (income is the better term) is not limited to money earned off of selling products. You can argue that the money from Google was a gift (gifts are not taxable to the recipient but are to the donor, with a small exclusion) but since Google is most likely earning indirect benefits from giving the money to Mozilla, it shouldn't qualify as a gift. It looks more like payment for a service.
Why go after Mozilla? (Score:5, Insightful)
Re:Why go after Mozilla? (Score:5, Funny)
Wow (Score:4, Insightful)
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85% of Mozilla's funding comes directly from Google?!? For all practical purposes, Google basically owns them. No wonder Mozilla was so forgiving of Chrome.
Or it might be that Mozilla likes the idea of friendly, standards-compliant competition which steals away large chunks of the Internet Explorer market share based on the Google name. But I'm just an AC, what do I know...
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Yeah, that's it.
Nobody at Mozilla likes to actually get paid.
--Toll_Free
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That is why Mozilla was so forgiving of Chrome. Anybody with half a brain could have seen that.
Chrome VS. the IRS? (Score:2)
The advent of Chrome makes it hard to make the case that Mozilla and Goggle are too closely tied, or the same entity. I suspect someone is just curious about a non-profit that is generating profits.
I tried reading the report, but still couldn't quiet tell what Mozilla's expenses are.
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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.
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The problem with your analogy is that Mozilla DIDN'T spend the money. That, in and of itself, is for profit.
If you have money left at the end of the year, it's profit. No other way to put it.
Google put millions into a non profit, got tax shelter for it. Non-profit DOESN'T spend all the money, non-profit is GOING to get investigated, since they ACTUALLY TURNED A PROFIT.
To get Google as well, they will have to prove collusion. However, if Mozilla has dollars left at the end of they year, that's classified
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?
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Many non-profits obtain all their money from a single source (the Bill and Melinda Gates foundation, for example). Any monetary benefit gained by Google would already be taxed. I guess that the only reason they're interested is because Google makes money. . . but I don't think that means they can't be a legitimate source of funding.
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.
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Unless Google also claimed a write-off for the donation, in which case the IRS's interest is understandable.
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Not to mention, Google gets a tax break from the Mozilla donations.
Mozilla hoardes the money, it's not being taxed or used.
That's a clear-cut violation of tax law, involving a non-profit. Google paid enough into a non-profit so that they actually SHOWED a profit.
Let this be a lesson to donaters and donatees in the future (like we can all donate millions, right???). If you're going to donate, at least ensure it's not going to generate a profit for the non-profit.
--Toll_Free
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That's a juxtiposition --- (Score:2)
Usually, people use Google to look at relationships...really closely.
Comment removed (Score:4, Interesting)
Re:Another good reason to end corporate taxation (Score:4, Interesting)
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.
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.)
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mod summary slightly flamebait :-) (Score:2)
Actually it's more like an "I'll pay your bills and even scratch your back a little as well" sort of agreement. Firefox had Google as the default selected search engine since before they made any agreement and before they got any money from Google, simply because the Firefox developers happened to think that Google was the most use
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
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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.
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If that were the case, the amount of money they are earning should fund a hell of a lot more development than is actually going on.
$50m+ per year should fund enough developers to work on a fully integrated suite of internet tools, but they seem to be barely coping with maintaining Firefox and Thunderbird.
Their primary interest seems to be ensuring that their Intellectual Property does not get included in distros like Debian. Open source non-
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.
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For those looking into the "GAP" accounting methods mentioned, it is actually GAAP - Generally Accepted Accounting Principles [wikipedia.org].
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.
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They'll do that by auditing the books, piling through receipts and conducting interviews with appropriate personnel.
I smell a new TV show! Like CSI, but with accountants!
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.
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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 busi
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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.
wake up (Score:2)
if its more than one consecutive incidents in close pursuit, one needs to be totally stupid not to realize something fishy is going on.
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Well, if we're going by crazy conspiracy theories with no factual backing whatsoever, why not Apple instead of Microsoft? its CEO is part of the board of directors of Disney, one of the largest US businesses and the one behind most of the copyright legislation currently in place, is reported to have a $1 yearly salary with "special benefits", yet has the IRS or *any* government institution ever investigated them?
At least with Microsoft we got an antitrust suit, with Apple the judges basically said "they're
ehhhh (Score:2)
on a sinking ship like this, the sentiment to find a scapegoat, a target, something to take vengeance on is sought generally. and microsoft's corporate culture is no mother theresa.
Ahhhhh wrong thread (Score:2)