[Foundation-l] Optional advertisement on wikipedia

[Michael R. Irwin]

Anthony DiPierro wrote:

>On 4/23/06, Delirium <delirium at hackish.org> wrote:
>  
>
>>Michael R. Irwin wrote:
>>    
>>
>>>Delirium wrote:
>>>
>>>      
>>>
>>>>The general rule is that a non-profit organization should have at least
>>>>one-third of its annual income come from a combination of: governmental
>>>>donations, donations from other public charities, and small (less than
>>>>2% of total income each) donations from the general public and private
>>>>charities (large donations can still have the first 2% counted).  If
>>>>that all adds up to less than 1/3, things get considerably more complicated.
>>>>
>>>>Whether advertising income would cause a problem depends on how much we
>>>>expect to get, and how much in large donations from private individuals
>>>>and charities we typically get.
>>>>
>>>>        
>>>>
>>>Interesting information.   Do you have any further detail.   Is the
>>>above a good general guideline because it is mandated by law;  accepted
>>>as good practice by accountants, IRS, rating organization, possible
>>>donors or other?
>>>
>>>Any background you care to provide regarding where you gained this
>>>knowledge would also be appreciated but I can follow up elsewhere if you
>>>do not care to provide that private information on a public mailing list.
>>>
>>>      
>>>
>>The official guidelines on the subject are in IRS publication 557,
>>"Tax-Exempt Status for Your Organization".  The relevant chapter for the
>>Wikimedia Foundation is chapter 3 on 501(c)(3) organizations (online:
>>http://www.irs.gov/publications/p557/ch03.html).
>>
>>I was a bit imprecise; these aren't requirements for all non-profit
>>organizations, but specifically for 501(c)(3) organizations, the type
>>that are required to be public charities.  That gives added benefits
>>over private charities (like the Gates foundation), such as allowing
>>people who donate money to deduct those donations from their taxes.
>>    
>>
>
>I thought the Gates Foundation *was* a 501(c)(3) organization.  I
>could be wrong about that, though.  Either way, a 501(c)(3) can be a
>private foundation *or* a public charity.  In fact, all 501(c)(3)
>organizations which make more than $5000 other than churches are by
>default considered private foundations unless they apply for and
>qualify as public charities under 509(a).  (see IRC 508(b) and 509(a)
>at http://www.access.gpo.gov/uscode/title26/subtitlea_chapter1_subchapterf_partii_.html).
>
>Also, donations to private foundations generally *are* tax deductible,
>just to a lesser extent (30% of AGI vs. 50% for most individual
>taxpayers).
>
>  
>
>>One-third support seems to be the
>>official line above which the organization is safe; if the public
>>support is less than that but above 10%, it's still possible to maintain
>>the status, but things get trickier.
>>
>>    
>>
>The 1/3 test is 509(a)(2).  The other (trickier) tests are 509(a)(1),
>509(a)(3), and 509(a)(4).
>
>  
>
Thank you Anthony for the excellent clarification!   I will file this 
information for future reference and sleep comfortably tonight knowing 
that you and Mark are well informed on the general requirements of non 
profit foundations.   No longer an immediate issue of interest to me 
unless we decide it would be beneficial to have an independent 
Wikiversity organization to work with the Wikimedia Foundation in 
meeting long term requirements.

Sincerely,
Michael R. Irwin