IRS wasn’t fond of Open Source, either

Open source software turned up on an IRS "BOLO" list.

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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  • Lari Korpi

    Is the main issue about reporting standards? I assume profits gathered by the for-profit sponsor would anyway be taxed accordingly.