People associated with Yorba, an open source organization that makes Linux desktop software, are ringing alarm bells about the IRS’s treatment of open source organizations. Although Yorba is a completely non-profit organization funded by donations, the IRS refused to grant the group 501(c)(3) status, which would have allowed donors to receive tax deductions.
Several other open source groups, like the Apache Foundation, the GNOME Foundation, the Mozilla Foundation and others already have 510(c)(3) status. However, last year it came to light that the IRS was targeting open source groups for extra scrutiny in the same many that it was targeting tea party groups.
Yorba’s letter from the IRS states, “You have a substantial nonexempt purpose because you develop software published under open source compatible licenses that authorize use by any person for any purpose, including nonexempt purposes such as commercial, recreational, or personal purposes.” This response raised the question of whether any open source organization could achieve tax-exempt status under this policy.