IRS Ruling Documentation

Last modified by Administrator on 2023/02/17 01:53

This page links to private letter rulings and other documentation of IRS determinations (from 2010 forward) relating to FLOSS organizations. Because private letter rulings are redacted, it is not possible to identify the applicants with certainty, but names of known or likely applicants are given where possible.

Statements of IRS policy

  • The Internal Revenue Manual 7.20.1.4.1 (revised 2012-12-20) lists "Cases Reserved for EO Technical," i.e. applications that are automatically elevated to the national office for intensive review. Included in this list are "[a]pplications from organizations providing free open source software in which the provision of free software is central to the organization's exempt purpose."
  • An IRS "Be On the Lookout" (BOLO) list dated to November 2010 identified categories of applications that first-line examiners should flag for further scrutiny. It lists "Open Source Software" (tab 5, line 2), saying "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." Under "Disposition of Watch Issues," the listing states: "The[re] is no specific guidance at this point. If you see a case, elevate it to your manager."

Applications denied by the IRS

Under 501(c)(3)

Yorba Foundation (PLR 201505040)

  • Exempt purpose: "to develop free and open source software that lets users easily work with photos, audio, and video modules in the [Linux desktop] software environment including a photo organizing tool, a programmer tool, an audio editing tool, and a video editing tool."
  • Determination letter
  • Applied: February 17, 2009
  • Determination: May 22, 2014
  • Rationale for denial:
    • Charitable purposes:
      • Commerciality/substantial non-exempt purpose: Publication of software under open source licenses that permit use of the software by any person, for any purpose, is a substantial nonexempt purposes.
      • Charitable class: Activities do not further a charitable purpose because the organization does not limit the beneficiaries of them to a "charitable class" such as the poor.
      • Charitable purpose (promoting the arts): Software for editing media does not "promote and develop the arts in a way that is recognized as furthering a charitable purpose" because the organization "do[es] not limit [its] distribution [to artists] and do[es] not know who uses the Tools much less if they use them for artistic purposes."
      • Public work: Software does not qualify as a public work, because the "erection of public works" as a charitable purpose has historically been limited to "facilit[ies] ordinarily provided to the community at public expense," and does not extend to "intangibles such as software." Even if it did, software is not a public work because:
        • "[S]oftware is not a facility" because: 1) "it is not a lake, park, or like any other public work described in [applicable revenue rulings]," 2) it "is intangible... [so] its perpetual existence and access by the public relies upon private persons hosting the code on private servers, and anyone may alter the Tools."
        • Software is "not something ordinarily constructed by public bodies for use by members of the public."
        • "A public work cannot be owned by private persons."
        • Open source software can be used by anyone "for nonpublic uses." 
        • A public work must serve "a community" and "[w]e have not found any authority for the proposition that the world is a community within the meaning of ยง 501(c)(3)."
    • Educational
      • Merely maintaining source code, documentation, user guides, manuals, and wikis is not an educational purpose, because the organization does not "instruct or train people" or "provide any formal or informal instruction on how to use the tools or other open source software."
    • Scientific
      • Software development a type of activity incident to commercial operations: "The release of the Tools software's source code is akin to the release of a commercial product and the release of object code is just like the release of a commercial product, not like the publication of scientific research. Therefore your software development is not directed to benefiting the public."
  • Other resources

PLR 201303018 (CASH Music?)

  • Determination: October 19, 2012

PLR 201044016 (Jumo?)

  • Determination: August 10, 2010

PLR 201349022 (OpenFOAM Foundation?)

  • Determination: September 10, 2013

PLR 201329021 (OpenID Foundation?)

  • Determination: April 23, 2013

PLR 201345030 (OpenSocial Foundation?)

  • Determination: August 7, 2013

PLR 201329026 (Schedules Direct?)

  • April 22, 2013

PLR 201405024 (provider of Creative Commons-licensed educational materials)

  • November 8, 2013

PLR 201340020 (provider of partly-FLOSS publishing software for publications targeting underserved communities)

  • July 10, 2013

PLR 201405022

  • January 31, 2014
  • Exempt purposes:
    • to provide internet technology "security expertise in creating and managing IT infrastructures for a broad range of organizations and companies that need advanced scalability and information security."
    • to enable freedom of expression by producing "citizen-media" campaigns and "protecting websites and services from government interference particularly in countries where governments attempt to shut-down websites, blogs, social media sites and other tools used for communication and education on the web.
    • "to provide independent bloggers and civil society organizations in democratizing countries with cyber-security."
  • Rationale for denial:
    • Providing computer security services is a trade or business ordinarily carried on for profit, but the organization doesn't limit its services to 501(c)(3) orgs
    • Internet access is not a human and civil right secured by law, because the UN Universal Declaration of Human Rights is not a treaty or law
    • Promoting free speech by non-US citizens does not promote a fundamental freedom, because the US constitution only applies to US citizens, and the organization's may be illegal in other countries.

PLR 201505041

  • November 6, 2014
  • Exempt purposes: "to coordinate and promote the development, production, distribution, and use of Free and Open Source Software useful for recording, converting, and playing audio and video."

Internet Systems Consortium, Inc.

  • Exempt purpose: "supporting the development of freely-available computer software programs which implement core protocols and standards."
  • Determination: November 13, 2000
  • Later approved after restructuring in 2004

Under 501(c)(4)

LEAP Encryption Access Project

  • PLR 201507025
  • Determination: November 18, 2014

Under 501(c)(6)

PLR 201420021 (BigBlueButton Foundation?)

PLR 201024066 (Open Media Now Foundation?)

OpenStack Foundation (PLR 201347022)

Applications approved by the IRS

Under 501(c)(3)

Apereo Foundation

  • Incorporated December 28, 2013
  • Applied January 2014
  • Approved September 2014

Brave New Software Project, Inc.

Calyx Institute

  • Applied August 2012
  • Approved November 2014

OpenMRS1, Limited (OpenMRS Inc.)

  • Applied May 24, 2012 as 509(a)(3) supporting organization
  • Approved March 7, 2014 as 509(a)(1) public charity

Open Source Elections Technology (OSET) Foundation

  • Applied (as Open Source Digital Voting Foundation) on April 21, 2007
  • Approved on July 18, 2013

Open Source Hardware Association

  • Applied July 27, 2013
  • Approved September 3, 2014

Open Source Robotics Foundation

  • Incorporated March 2012
  • Applied March 2013
  • Approved June 2014

Sahana Software Foundation

  • Applied July 1, 2009
  • Approved January 5, 2012

Sarapis Foundation

  • Applied July 2014
  • Approved September 2014

X.org Foundation

  • Approved May 17, 2012

Under 501(c)(4)

Open Source Geospatial Foundation

  • Converted 501(c)(3) application to 501(c)(4) application
  • Approved September 9, 2013
  • Letter from OSGeo's attorney David Atkin explaining that the IRS would only approve the 501(c)(3) application if OSGeo revised its proposed activities to exclude all but educational activities.

Under 501(c)(6)

OpenID Foundation

  • Board approved transition from 501(c)(3) application to 501(c)(6) application on February 27, 2013
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