On Mon, 6 Oct 2003 14:04:36 -0700, Jimmy Wales <jwales(a)bomis.com> gave utterance to the following: Hmm, since the Wikimedia Foundation is actually supposed to be a global organisation, it is starting to sound as though it might have been better to register it somewhere beyond the reach of US beauraucracy. Do all world charities have to register in all 50 states, or only if their home base is in one of them? -- Richard Grevers Between two evils always pick the one you haven't tried

Alex R. wrote: One important point in these treaties is that the deduction available to a resident of one of these countries is limited to a proportion of his United States source income. Someone with no US source income has no deduction. Ec

From: "Jimmy Wales" <jwales(a)bomis.com> That is a good point. I think DC's limitation is $1,500. but some states require that you file a form that asks to be exempted. In any case most states require that the form be filed within a certain period of time after the fiscal year ends only some states require filing before any solicitations are made. That is true and an argument that comes up when discussing national registration exemptions, it is an undue burden, this is also the rationale behind granting an automatic $5,000 exemption by the IRS. This is yet another argument that is brought up when talking about uniform or national registration for small volunteer organizations. The transaction costs are very high in volunteer time which is often limited. Akex756

On Mon, 6 Oct 2003, Delirium wrote: 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! -- brion vibber (brion @ pobox.com)

From: "Ray Saintonge" <saintonge(a)telus.net> 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 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

=================================== NOTICE TO INDIVIDUALS NOT INTERESTED IN TAX LAW DISCUSSION Sorry this is long, but charitable tax law, trusts and such stuff is complex. That is not my fault, I have tried to be as brief as possible without omiting any part of my argumentation so that someone who is interested can follow my points as completely as possible. If you are not interested, just delete it without reading it. Thank you. Alex756 ================================= From: "Ray Saintonge" &lt;saintonge(a)telus.net&gt; ...<snip>... This is not true, I was not agreeing. . I was stating that the fund may be part of Wikimedia. Ec is only stating that Brian is receiving a personal no strings attached gift. I am stating something quite different. I could be wrong, but I think Ec has not understood what I was talking about. How does one know how many gifts a donor may give? This statement that gift tax is not an issue is misleading, such a tax is a potential problem for the donors, anyone receiving gifts should keep this in mind before soliciting gifts, especially if it can make requests through a charity when there is a charitable purpose. It would make better sense to allow the gift to be given to the charity making it a donation, if such can be legally achieved. It is definitely an issue as it is part of the transaction cost of making a gift. If the same person gives the money to Wikimedia then instead of paying gift tax they would be obtaining a deduction (a tax benefit) not being taxed (a tax liability) or receiving no benefit (if the aggregate amount donated to one donee is less than $11,000 per year). This is an important thing not only for benefactor but for recepient to keep in mind; giving the benefactor an additional benefit encourages giving. <...snip..> This statement does not warrant a response, it appears to be a personal attack. However perhaps Ec just didn't understand what I was talking about. Clearly I was not stating that I am anyone's tax advisor, nor am I giving any tax advice, what I am stating is that we do not have all the facts and we are not in the position to determine the facts of Brian's life and his personal tax liability which may be based upon his status as a sole proprietor of a business and the legal determination that the money he receives is part of his business income. He certainly seems to believe that the money might be personal income. Perhaps he has a good reason to think that it is income? I was stating the issue of tax status of "donations" through concrete factual investigation, not just conjecture. Other internet promoted developers have stated to me that they accept "donations" for their activities that include distribution of "free software" and they consider the money they receive as "income". I did not advise these individuals of that, they stated that to me. It is their opinion and action, not mine. I am merely stating that it is an approach that is followed by other internet sites that accept donations as income as there is a benefit. Of course most of these businesses have operating expenses, thus the income they receive can be offset by their expenses. This is not possible if what they are receiving are "gifts". If they are accepting gifts they cannot deduct their expenses, from these gifts. You cannot be operating an business if you have no income or expectation of income; the IRS will disallow that and classify your activity as a hobby. You can obtain a much greater benefit if you are operating a business and are receiving legitimate income; then all your legitimate expenses may be deducted from income. (not just the depreciation on the notebook). A "free" software developer may be a business, clearly if they receive funds for their services (maybe not for copyright licenses). ...<snip>... Criminal? Probably not. Illegal? Perhaps it would be. It may be a breach of contract, or there may be an estoppel or detrimental reliance issue. If the money is collected for a Wikipedia tool but then used for something else that is not "cy-pres" (a related purpose) is that not a misrepresentation of a material fact? The donors were led to believe that the money was to be used to purchase a computer; and it would be used to improve the Wikimedia software through Brian's efforts. If the use (or similar use) is not carried out the donors could and possibly might demand their donations back. It also is not equitable to say you are asking for money for one thing and then just spend it on something else that is unrelated. Brian did not say, just give me money because I am a great guy and I deserve to get money from whomever wants to give it to me. He stated he needed a notebook to help Wikipedia projects as he is a developer of the project. He may not receive cash, but he does receive publicity (goodwill) and is associated as an expert on Wikimedia software. Donations can definitely have strings attached to them and they can result in binding contracts. Many philanthropies give donations with strings attached, I have done it myself and the charities I gave it to have been bound by my conditions; they know that they are bound as the donation with a condition creates a binding obligation. As everything here is done in writing there is no Statute of Frauds problem. I make a donation to my deteriment and I rely upon the statements of the benefactor. That is a good substitute for consideration. It creates a binding obligation. It may or may not be a "contract" strictly speaking, but it can still be binding even if it is not a contract "at law". that he has been Once again I cannot agree that there may not be an implied contract or even an unjust enrichment argument there. This hypothetical sounds like those charities that say, "Give us money for the sick children" and then they pocket the money. This is exactly why the AGs intervene in these kinds of things -- to protect donors. Sometimes they do recover the money absonded by fake charities, sometimes they arrest the individuals who basically have misrpresented themselves to the public and converted the charitable funds to something that they use for their own benefit. How easy it would be for their lawyers if they could use the gift argument proposed here to get out of any liability for fraud, misrepresentation and other sundry "illegal" acts. Also, the donors could start a civil action against those who took the money (and don't give me that it is too expensive, it only costs a few dollars to file a lawsuit in small claims and in federal court someone might do it under diversity jurisdiction for $150). But there is an obligation. How can one say there is no obligation? I cannot agree with this statement that there is no legal obligation. Just by saying that it is an "atmosphere of trust" does not move the whole activity out of the sphere of legal institutions; isn't this wishful thinking? We are all bound by laws even if we attempt to contract out of them and no one has attempted to contract out of law on Wikipedia. Brian solicited money to buy a computer to use it for Wikipedia, that is very clear. He is not just asking for people to give him a gift. There is no statement to that effect anywhere. It even states on Wikimedia's fundraising page: "You can also donate to the Brion Vibber notebook computer fund." This makes it sound like the notebook computer fund is part of Wikimedia, no? <..snip>... I said nothing of the sort -- this is a misreading and it seems to me to be a very unreasonable misreading. Once again Ec seems not to have understood the central point of my statements, i.e. that the Notebook Computer Fund might be considered part of Wikimedia, otherwise if not then maybe Brian legitimately declares the income as part of his business and he can deduct expenses (and may even be able to post a loss and it may come to essentially the same tax liability, i.e. nothing to Brian). This is all very simple, what is complex is the law underlying it and what that means (and might mean in the future since Wikimedia Foundation must comply with all the laws relating to charitable organizations). Regarding Wikimedia what I am saying is that hypothetically Wikimedia is authorizing Brian to accept donations for Wikimedia and purchase a computer for it that Brian has possession of. Brian may be putting the money in his own bank account, but he got it through his association with WIkimedia. Donors, generally speaking can't give a partial interest as their donation unless the property is given in the form of a trust: http://www.irs.gov/pub/irs-pdf/p561.pdf (at page 7) so obviously anyone with a smattering of tax law knowledge would know what I am talking about (sorry, tax law is complex, that is not my fault). Thus, if Ec's interpretation was correct he is suggesting that the donation would be a partial interest in property which is generally not deductible in any case, obviously that is not what I was talking about at all to anyone who seems to know about taxation law. While there is no statement in my post that the property is being given to Brian in trust, however it might be reasonable to assume that it was a trust (maybe just implied with no formalities, nothing could be simpler, the use of the word "Fund" may be construed as making the money Brian receives a part of Wikimedia's assets). Then, the only possible interpretation of it being under a trust is that it is a charitable trust, and Wikimedia would be the beneficiary of the corpus of the trust. There would be some kind of charitable purpose that would be carried out. Then there might be some way to make the plan deductible from income for the donors (it is interesting to note that the charitable condition on the funds and the trust idea may come to the same essential conclusion). I cannot see anyway a simple trust (one that is not charitable) could allow for a deduction for the donors. It is essentially the same as stating that Brian is authorized to accept the funds on behalf of Wikimedia, buy the notebook, use it and then give it to Wikimedia if and when he is either finished with helping Wikimedia or does not need it anymore for that purpose. If he sold it at fair market value the proceeds would go to Wikimedia. Certainly some occasional use of it for other purposes would not be a violation of any law (just like working on Wikipedia at work for a few minutes is probably not going to make your employer fire you). At some point Wikimedia will have depreciated the full value of the equipment and it may write it off its books. It could then be sold at fair market value to Brian (which would be minimal after a number of years). My feeling is that this would not run affoul of the [[intermediate sanctions]] provisions of the tax code. I would be interested in seeing if anyone disagrees with that. I cannot see how Brian could be an "disqualified person," under Section 4958 of the Code but I could be wrong. In any case if he uses it for Wikimedia's exempt purpose then he is not obtaining any benefit and 4958 appear not to even apply it might only apply if there was a transfer of title. The whole point of the charitable domain is that once property enters into it the benefit does not acrue to an individual, the individual uses the property to help the charitable cause (Wikimedia). The property in that case would belong to Wikimedia, Wikimedia would have the reversionary interest as a charitable remainder under the trust scenario (and with a constructive trust it can be imposed after the fact or may be recognized as an implied or resulting trust). If it were recognized as part of Wikimedia those who contributed could possibly receive a charitable deduction rather than nothing (a gift is not deductible from income) Brian could keep the computer as long as he continues to volunteer (hopefully for years). Is there anything wrong or illegal in that? Brian did announce this all on Wikipedia some time ago and it has been at least implicitly allowed by Wikipedia and Wikimedia so it could be considered a Wikimedia "fund" (of course if Brian gets more money than the costs associated with the laptop he would have to turn that over to Wikimedia or use it for Wikimedia somehow with the approval or ratification of Wikimedia). In that case there is no issue of the donations being any kind of income or gift to Brian. Alex756