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So You Want to Start an Open Source Non-Profit?

on Fri, 05/23/2014 - 00:47

Caveats: I am not a lawyer (IANAL). Always seek professional advice when filing for non-profit status.

The Privly Foundation's experience in gaining non-profit status is a teachable moment for any organization engaging in open source development. After 300+ pages of filings, considerable pro-bono support, and a conference with IRS examiners, we would like to "open source" our experience. Simply put, if you engage in software development as part of your non-profit mission, you are going to have a rough time with the IRS.

Many independent open source projects exist for public purposes, but it is clear from our discussions with IRS representatives that most projects will not be eligible for 501 (c) 3 status. When approaching the IRS you must have a convincing public purpose that does not focus on software development. Privly is special because our educational purpose temporarily depends on software development. The rationale is that we cannot effectively educate the public about online privacy without more usable privacy software. As Priv.ly and other privacy projects mature, the Foundation's software development activities will become insubstantial compared to the educational activities.

Navigating the complexities of public purposes as defined by the IRS is challenging. The Privly Foundation was fortunate to receive the professional services of accountants and lawyers pro-bono. If you don't have access to similar resources, it is doubtful that you will be able to gain or maintain your exemption without spending much of your budget on legal advice. Unless you MUST incorporate as a separate identity, we recommend you work through existing umbrella organizations like the Software Freedom Conservancy, Software in the Public Interest, the Open Source Initiative, the Python Software Foundation, Apache Software Foundation, etc. These organizations exist to keep projects from burning time and money on administrivia.

Feel free to ping me on IRC with further questions. I am smcgregor on irc.freenode.net