IRS wasn’t fond of Open Source, either

The “Be On the Lookout” – BOLO – list that the United States Internal Revenue Service was using in November 2010 didn’t just list “Tea Party” and “Progressive” as trigger words for further investigation. Amidst the blacked-out redactions, this turned up on the watch list, page 13:

Open Source Software

These organizations are requesting either 501(c)(3) or 501(c)(6) exemption in order to collaboratively develop new software. The members of these organizations are usually the for-profit business or for-profit support technicians of the software.

There is no specific guidance at this point. If you see a case, elevate it to your manager.

I would guess that the IRS was suspicious of Open Source Software because it figured that it was primarily a profit-driven project. Perhaps they had had some applications that clearly benefited only a single profit-making sponsor, or perhaps they simply hadn’t understood the dynamics of open source.

By February 8, 2012, they had added “The software is provided for free, however, fees are charged for support by the for-profit,” and specified a contact for the cases.

Many more BOLOs are available here. Assuming that it isn’t just buried under black ink, Open Source Software seems not to be on the latest April 2013 lists.


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topic: Programming
  • David A. Wheeler

    The April 2013 is heavily redacted. I wouldn’t assume that open source software is on the list, or off the list. Instead, I’d say that we simply do not know if OSS is on the list or not.

  • Ben

    It makes sense that OSS is a contentious issue for the IRS. For profit companies are in many cases the primary contributors to the software. They can also be the primary managers and curators of the community. Giving tax exempt status and even worse tax-exempt fundraising status to a for profit company can raise a lot fo issues. Any type of resource sharing between the entities could be extremely suspect. All that said I’m sure this can be managed with proper records keeping and separation of resources which is probably why they say to elevate questions up the chain to be sure.

    • Paul Noel

      Try on for size the fact of “not for profit” Medical Care Hospitals, Clinics and etc and the tell the IRS to get real or to shut up.

    • MrEricSir

      But any sort of non-profit will run into these issues. Hell, there’s non-profit movie theaters and bars. Why would open source be any more suspect than these ventures?

  • mj

    I have no problem with the IRS looking carefully at potential charities to see if they are legitimate – they certainly seemed to have missed a few, such as those that return only a few percent of their total income. What is objectionable is political bias in the ones they select for checking.

  • Simon St.Laurent
  • jordenwagon

    Open source softwares are generally available at free of cost so it might be used to get more profit to develop dynamic application.