[Foundation-discuss] Re: [OpenAFS-announce] Foundation Update 3

[Jeffrey Altman]

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[This e-mail was originally sent on 16 Feb 2013 but due to a
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On 2/15/2013 3:00 PM, Roman Mitz wrote:
> Today, I am pleased to give you another update on the Creation Committe=
e=E2=80=99s work, in striving to set up a non-profit foundation for OpenA=
FS.=20

Roman, Thanks for the update and thanks to the committee for the
continued hard work.

> To summarize:
>=20
> 1.     It appears that IBM may give us written permission to use OpenAF=
S and AFS for the name and description of the impending foundation.=20
> 2.     In that case, we will name the foundation =E2=80=9CThe OpenAFS F=
oundation, Inc.=E2=80=9D
> 3.     We have been working on the Articles of Incorporation and the By=
laws for the foundation.
> 4.     Both of these documents are needed at the time of incorporation,=
 but will also be submitted thereafter to the IRS when we apply for a not=
-for-profit 501c3 status.
> 5.     We are committed to finalizing these documents by the end of Feb=
ruary.
> 6.     We will then consult a legal counsel to verify our materials.

I have two concerns which I hope the committee will address.  The first
is the choice of 501c3 status.  I am fairly sure that you are aware of
the challenges that FOSS organizations have had in the last couple of
years obtaining approval from the IRS as a 501c3 charitable non-profit.

What you may be unaware of is that on 20 Dec 2012 the IRS published IRM
7.20.1 which states the current opinion of the IRS with regards to the
evaluation of Exempt Organizations.  Under this IRM "Applications from
organizations providing free open source software in which the provision
of free software is central to the organization's exempt purpose." must
under go a mandatory Technical Review to ensure that the organization is
not organized or operated for the benefit of "private interests".

There is a growing legal consensus that a project which receives
substantial portions of its source code from private commercial entities
or those which have as significant beneficiaries private commercial
entities will not be approved for charitable status under Title 26,
Section 1.501(c)(3)-1.

Back in 2000 when OpenAFS was formed more than 85% of the source code
contributions originated with academic and scientific organizations or
individuals.  Today more than 85% of the contributions originate with
for-profit commercial support providers.  In addition, the use of the
software is not restricted to academic, scientific and not-for-profit
organizations.  As a result it will be very difficult for OpenAFS to
successfully pass an Exempt Organization Technical Review.

Given the current degree to which the OpenAFS software is driven by
commercial interests the best fit for a Foundation to be formed under
Title 26, Section 1.501(c)(6).  As such the Foundation would be a
Business League which manages the source code for the benefit of the
member organizations.

Another alternative that is selecting a 501c4 civic association or
social welfare organization.  This approach is being considered for FOSS
organizations that primarily consist of individual contributors and
which have as a primary responsibility the promotion of FOSS policies.


My second concern is that there is no mention of the business plan for
the organization without which it will be impossible to judge how the
organization will carry out its mission as described in its Articles of
Incorporation and Bylaws.  When the MIT Kerberos Consortium plan was
shopped to the relevant community it included a seven year road map
including goals, projects, staffing, budgets, membership, and funding
raising targets.  I do not believe the viability of the Foundation can
be judged without such a plan.  A business plan will also be a key
document necessary to argue to the IRS for whichever tax exempt status
the Foundation eventually pursues.

Jeffrey Altman





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