[Wikipedia-l] Interstate charitable solicitations

Tue Oct 7 18:42:09 UTC 2003

From: "Ray Saintonge" <saintonge at telus.net>

> Brion Vibber wrote:
>
> >On Mon, 6 Oct 2003, Delirium wrote:
> >
> >> What about things like Brion's notebook fund-- is he
> >>supposed to register that in all 50 states too?  The whole thing seems a
> >>bit ridiculous, which is probably why most people just ignore it.
> >>
> >Damfino, but I'm not a charity; I expect to pay income tax on it and
> >would consider it to be technically 'wages, tips, and other income'.
> >
> >Yay taxes!
> >
> You make it sound like you enjoy paying taxes.  Not being a charity does
> prevent donors from taking deductions for their donations.

But if they get audited do you think the IRS will allow them to take it
as a donation? Gifts are not generally deductible under US tax law
unless such gifts are made to a charity for a charitable purpose.

http://www.irs.gov/pub/irs-pdf/p526.pdf Page 5 col. 2 states that
donations to individuals are not deductible from income.

Generally speaking in US law (I am not talking about other countries
here whose law may be substantially different from US law) the only
donations that one may deduct are to organization that have a tax
exemption by law (the so called $5,000 income per year exemption)
or by determination under the law by the IRS (available to all
not-for-profit
groups, corporations, trusts or associations).

Now maybe given money to Brian for his notebook is really giving
money to Wikimedia for a notebook that Brian can use for Wikimedia
projects. Otherwise it is not a tax deductible donation.

If someone gives you a gift it they may also have to pay a gift tax:
http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

> The amounts
> that you received were not received as a part of a business venture, nor
> would the donors receive any clearly identifiable, direct benefit.
>  These amounts are gifts, and as such are excludable from income.

I am not familiar with Brian's personal income situation, but the question
may be a bit more complex than it appears. If Brian is developing software
that is licensed for commercial use (as all of the licenses software and
documentation are), then he might have an expectation for commercial
gain at some point in the future (someone wants a special patch and
Brian is the only person who can do it so then ask Brian to do it for
them in exchange for payment for services rendered, nothing wrong in
that). If his is self employed he may be using the notebook for several
purposes and it may then be considered depreciable property under
tax law and he may be able to amortize it over several years.

Sometimes if you are in business for yourself (independent contractor)
as many software developers are (even if they have a "day job")
there are more benefits to declare it as income producing. If it is just
a gift then it cannot be depreciated in such a manner. If you are in
business for yourself and have no income then the  IRS will not allow
one to take deductions after a point.

This is really an issue his tax advisor should look at, and perhaps
if Wikimedia wants it can consider this under its umbrella, though
in that case Wikimedia will have a reversionary interest in the notebook
if Brian does not continue to help Wikimedia for the useful life of
the equipment.

There are many "business" sites on the internet that have PayPal
"Donation" buttons on their site. I have inquired with a few of them
and they all state that they are not charitable or not-for-profit and
they are asking for voluntary payments in exchange for their open
content or free software or services. They consider themselves
businesses and declare the donation as income, not as a gift. If someone
provides a service and makes some money it is income.  The money
is not being given to Brian for a purely gratuitious purpose, there is
an expectation that he will use the notebook to work on Wikimedia
projects. It may not be a gift in that analysis. It may be income
as he is providing a service just like these other "businesses" who
are declaring their donations as business income. His business is
providing services to Wikimedia in exchange for a notebook.

Alex756