So basically, Yorba f'd up by not getting advice from someone with deep knowledge of the proper bureaucratic bs to proffer for a successful application for tax-exempt status.
That's a little unfair. A 501(c)3 is a huge asset - not only is a 501(c)3 exempt from federal income taxes (and often state sales taxes) but people can make tax-deductible contributions to a 501(c)3. If two companies are producing a product and one is a 501(c)3, then that company has an enormous competitive advantage in the marketplace. Yorba is producing software that commercial software developers also produce. The IRS has a very good reason to make sure that Yorba is actually an exempt organization before it grants tax-exempt status - otherwise the government is effectively subsidizing one company in the marketplace.
Yes however one company builds a product to sell it or make a profit in some other way while another gives it away for free.
I would argue that the OSS company is still at a disadvantage since they have to figure out how to feed the developers (pay them a decent wage) while still giving the software away for free.
That's one option however a very annoying one for their users plus if it happens to be something non standard like a Linux terminal app where do you put the ads?
A 501(c)(3) is still subject to federal income taxes on its business income that is not directly related to its charitable purpose (aka "unrelated business income").
IOW, there is no advantage to being a non-profit unless your business is a charitable activity.
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So basically, Yorba f'd up by not getting advice from someone with deep knowledge of the proper bureaucratic bs to proffer for a successful application for tax-exempt status.
That's a little unfair. A 501(c)3 is a huge asset - not only is a 501(c)3 exempt from federal income taxes (and often state sales taxes) but people can make tax-deductible contributions to a 501(c)3. If two companies are producing a product and one is a 501(c)3, then that company has an enormous competitive advantage in the marketplace. Yorba is producing software that commercial software developers also produce. The IRS has a very good reason to make sure that Yorba is actually an exempt organization before it grants tax-exempt status - otherwise the government is effectively subsidizing one company in the marketplace.
Yes however one company builds a product to sell it or make a profit in some other way while another gives it away for free.
I would argue that the OSS company is still at a disadvantage since they have to figure out how to feed the developers (pay them a decent wage) while still giving the software away for free.
Can't they just slap ads everywhere?
That's one option however a very annoying one for their users plus if it happens to be something non standard like a Linux terminal app where do you put the ads?
A 501(c)(3) is still subject to federal income taxes on its business income that is not directly related to its charitable purpose (aka "unrelated business income").
IOW, there is no advantage to being a non-profit unless your business is a charitable activity.
Following that logic, if I rob 4 of my 5 neighbors, I have subsidized the 1.