> Could you describe how this abuse would take place, exactly? R&D is already tax deductible.
Here's how:
(1) Company sponsors and in-effect (though not in name) controls nonprofit doing open source development.
(2) Company provides "discounts" on its services (e.g., support or other services tied to, or closed source software license for software that depends on, but is not -- if the OSS is copyleft -- strictly derivative of the OSS developed by the non-profit) to people who donate to the non-profit. Company has now effectively restructured itself in a way that its R&D costs, or some substantial portion of them, are not merely tax deductible for it (as they would be as business expenses in any case) but also funded by tax-deductible payments from customers (which payments may not have been tax deductible expenses otherwise, particularly if the software isn't exclusively for the B2B market.)
Its not the "open source" that is the problem, its the relationship with the sponsoring company -- but I can certainly see why "open source" development is a cover for a "charity" that could be ripe for abuse, and why the IRS might want to carefully scrutinize charities of that type.
Ah, that makes total sense. I was thinking about it from the perspective of the tax the entity pays, and didn't realize "donations" to this type of entity were tax deductible. That would indeed be ripe for abuse.
Here's how: (1) Company sponsors and in-effect (though not in name) controls nonprofit doing open source development. (2) Company provides "discounts" on its services (e.g., support or other services tied to, or closed source software license for software that depends on, but is not -- if the OSS is copyleft -- strictly derivative of the OSS developed by the non-profit) to people who donate to the non-profit. Company has now effectively restructured itself in a way that its R&D costs, or some substantial portion of them, are not merely tax deductible for it (as they would be as business expenses in any case) but also funded by tax-deductible payments from customers (which payments may not have been tax deductible expenses otherwise, particularly if the software isn't exclusively for the B2B market.)
Its not the "open source" that is the problem, its the relationship with the sponsoring company -- but I can certainly see why "open source" development is a cover for a "charity" that could be ripe for abuse, and why the IRS might want to carefully scrutinize charities of that type.