501(c)

The "interests of the community" is an extremely vague (arguably intentionally so) distinction. If you squint you can argue that almost any purpose is in the "interests of the community".

For example, if the maker of drug X wants journalists to run a story asking that readers "Demand government programs and private health insurance pay for drug X" that's just marketing, and might even have a tag saying it's sponsored content. But create a Patient Advocacy charity for patients who could use drug X, pump some funds from the pharmaceutical company into the charity and your story is now "Y Syndrome Foundation told us how patient Z can't get the drug X that would help them so much because it's not currently included in their health insurance. With your help we can change that". And you don't even have to pay tax on this nifty scheme because it has 501(c) status.

The reason why we're seeing more push back for Free Software projects seeking 501(c)3 is similar. If I develop a piece of software that's useful only for my product X, that's a normal taxable business activity. But if I "spin out" the software development as a Free Software project under 501(c)3, I can say that's a charity giving the community this (useless unless buying product X from me) software and that part of the business is suddenly not subject to tax. That's clearly a joke and we shouldn't be surprised that some groups with no clear purpose beyond "make this particular piece of Free Software" are struggling to get 501(c)3 now.

Organising as 501(c)6 often better represents the reality that the Free Software development benefits a bunch of private organisations or individuals and only indirectly the wider community (by reducing duplicated effort among those organisations and individuals).

For 501(c)3 the excuse is often given that organising this way ensures "transparency". In fact, particularly for smaller charities, IRS rules effectively don't require any transparency at all. I strongly recommend that anyone getting involved in one insists the new charity formally agree to provide real transparency - e.g. publishing detailed financial accounts, agendas and subsequently minutes of board meetings, all in a timely fashion - in their founding documents and to wind up the charity if for any reason they cease to achieve that transparency. The problem isn't a lack of will per se, nobody that I've seen sets out to enable fraud and abuse, it's just that actually running the organisation turns out to take more than an occasional five minutes and the promised "transparency" is always bottom of the TODO list, but the _effect_ is that abuse and even fraud take place. Forcing people setting up such charities to face up to that and shut the thing down rather than constantly hope they'll "sort that paperwork out next month" means the abuse gets worse not better. We can't expect the US Federal Government to reform 501(c) any time soon but we can demand new Free Software (and allied) charities do better.