Angela wrote:

...

I would like to open up the issue of the WMF getting involved in political matters, such as copyrights and patents.

This has the potential to disqualify the Wikimedia Foundation from 501(c)3 status which would mean, not only, that we need to pay tax, but also that we would then be severely restricted in the choice of grant applications open to us.

According to http://www.irs.gov/charities/charitable/article/0,,id=120703,00.html : "no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying)."

If the Foundation were to have any such involvement, we would need to be very careful that our activities were aimed at educating people about these issues as opposed to encouraging people to lobby about them.

For a little more information on this, I should mention that the restriction in section 501(c)(3) of the Internal Revenue Code ("no substantial part of the activities" of the organization may be aimed at "attempting to influence legislation") does not contain an exception for legislation that is somehow related to the organization's purpose. And even efforts to educate people can be interpreted as "grassroots lobbying" under IRS rulings and disqualify an organization from 501(c)(3) status. In particular, efforts at voter education that coincide with election campaigns tend to come under scrutiny for this; perhaps more so, in fact, than similar efforts that coincide with the consideration of specific legislation.

How is it, then, that we see general nonprofit organizations getting involved in politics? One option is to create a separate organization under section 501(c)(4) of the Internal Revenue Code for political activity. This second organization can still be exempt from taxation itself, but significantly, donations to it are not tax-deductible. The alternative is for the organization to elect to be subject to section 501(h) of the Internal Revenue Code, which replaces the "no substantial part" restriction with specific limitations on the organization's political expenditures.

The basic requirement with a 501(c)(4) lobbying affiliate is that the two organizations "be separately incorporated and keep records adequate to show that tax deductible contributions are not used to pay for lobbying." (Regan v. Taxation With Representation of Washington, 461 U.S. 540.) Whether additional restrictions apply to the relationship between the two organizations is not always certain, either in IRS regulations or in terms of the U.S. Constitution. For the sake of simplicity-don't laugh-I've left out political organizations under section 527, which are somewhat similar in concept, but less likely to be affiliated with a specific 501(c)(3) organization and have different IRS reporting requirements.

Section 501(h) creates a different set of restrictions, and requires the organization to report its political expenditures to the IRS regularly. The IRS publication cited by Angela discusses the 501(h) option briefly. The exact expenditure limitations are based on a percentage of overall expenditures and capped at $1 million overall. However, "grassroots lobbying", which is what I guess we might focus on most, is subject to a lower scale and cap.

In either case, the effort needed for the Wikimedia Foundation to get involved in any substantial kind of political activity would add considerable complexity to financial and accounting matters. I'm not sure if our financial procedures are in a state to support this kind of change, although certainly they need to get there, regardless of how politically active we become. However, the Foundation's mission as I understand it is education and the dissemination of information, and I think any political activity should be incidental to that mission.

--Michael Snow