IRS Puts Open Source Projects Under Microscope, Spawns Nonprofit Black Hole (Wired)

Basically a few years ago a tax code change requiring disclosure of political donors caused a whole bunch of political organizations to claim they were social charities (engaged in social welfare charity which typically encompassing a few categories like helping people find work, educating them, helping with housing, food etc, basically trying to better society and peoples lives). They did this because donations to social charities are not required to be disclosed to the public. As a result the yearly number of organizations applying for social charity status went up dramatically (I don't recall the exact numbers but I think it was almost a 3000% increase in applications).

Faced with a massive increase in applications, and no increase in budget or staff the IRS applied some filters to the applications to try to set some of the applications for further review. They used common political (social charities are specifically bared from direct political activity) terms like Tea Party, Progressive and even selected other categories like Open Source which apparently the IRS doesn't understand. Though most of us would agree that Open Source qualifies as Social Charity in that it provides access to good software that helps people, in particular the poor there is significant misunderstanding from the IRS probably because there are fortune 500 companies like RedHat engaged in open source. As stated previously the IRS was concerned that these charities were engaged in for profit activity and using charity status to conceal that income.

But this is all the result of a massive number of political organizations trying to claim social charity status to avoid revealing their contributors. As an example of what I believe is the abuse the IRS was looking for it's been reported that Crossroads GPS, a organization run by Karl Rove that played a significant role in the last election (including running hundreds of political commercials in key states) was officially a social charity and in fact filed official documents claiming social charity status stating they were NOT engaged in political activity. As I said this is evidence of what the IRS was trying to stop but was being buried in paperwork by similar organizations.

The solution to this problem is to better define social charity in the tax code and put people who claimed to be doing social charity but were in fact engaged in political action where they belong, in jail. It's been very difficult for the truth to come out because there are powerful people in the echo chamber that have clearly (IMO) engaged in fraud by claiming social charity status. I have a strong belief none of them will ever be punished and the IRS workers will be thrown under the bus to distract the public from the real issue at play. Hopefully I'll be wrong on that.