Re: [Iasa20] Answers

[Alissa Cooper <[e-mail]>]

I’ve received some further information from the Morgan Lewis attorneys on a couple of these questions. See below.

> On Mar 2, 2018, at 2:43 PM, Alissa Cooper <[e-mail]> wrote:
> 
>> 
>> 2. For option 2 and option 3, we’d like to understand what kinds of provisions could be included in an operating agreement between ISOC and the IETF entity regarding board appointments and control, assuming we want to maximize the IETF’s ability to determine the composition of the board.
> 
> Awaiting the lawyers on this.

Under option 2 (the Type I supporting organization), it would be possible for ISOC to delegate the authority to appoint board members of the IETF administrative organization to a subcommittee of the ISOC Board. So, for example, it would be possible for ISOC to delegate this authority to a subcommittee consisting of the four IAB-appointed board members, and for that arrangement to be documented in an operating agreement between ISOC and the IETF administrative organization. The IRS may raise a question about this but the attorneys did not consider it to be a serious risk. Under option 2 it would not be possible for ISOC to delegate this authority outside of the board (e.g., to the IAB or the IETF nomcom).

Under option 3 (the LLC as a disregarded entity of ISOC), it would be possible for ISOC to delegate the authority to appoint board members of the IETF administrative organization to a subcommittee of the ISOC Board or to a non-board body such as the IAB. This arrangement could be documented in an operating agreement between ISOC and the IETF administrative entity, and that agreement would also need to make clear that ISOC retains all economic interest in the LLC. 

> 
>> 
>> 4. We’d like to understand whether it would be possible for the IETF administrative entity to be incorporated outside of the US under options 2 and 3, and if so, how the administrative complexities compare to incorporating the entity in the US.
> 
> This appears to be quite complicated. Across a survey of jurisdictions, the issues to address would include understanding the local tax laws, the intersection with US tax laws, jurisdiction for tax receipts, analysis of what is deductable, etc.; rules for obtaining non-profit status; employment rules and regulations; requirements for banking, bank transfers between jurisdictions, and transfer pricing; and numerous other issues. Although ISOC does have an office in Geneva, that would not help to bootstrap the process of incorporating in Switzerland in any particular way.
> 
> The lawyers may follow up with more detail here.

The Morgan Lewis attorneys recommend against this for several reasons.  Individual and corporate taxpayers in the U.S. could not take a charitable contribution deduction for donations unless the entity is incorporated under U.S. law.  In addition, there may be some limitations as to the ability of ISOC and its affiliates to provide financial support if the organization is created outside the U.S.  Finally, if the organization will conduct activities in the U.S., it may need to apply for U.S. tax exemption and comply with the tax laws of both the U.S. and the other country, creating unnecessary administrative burdens. 

> 
> 
>> 
>> 6. We’d like to understand how the tax receipts work under option 3 — whether sponsors and/or meeting attendees will pay the IETF administrative entity but receive a tax receipt from ISOC, or whether there is another way of handling receipts.
> 
> Awaiting the lawyers on this.

Tax receipts would not be issued to meeting attendees because registration fees are not considered charitable donations.

For sponsors, the IETF administrative organization would be able to issue acknowledgment letters to sponsors on its own letterhead, even though the IETF organization would be relying on ISOC for its tax exempt status.

Hope this is helpful.
Alissa

> 
> Best,
> Alissa
> 
> 
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