Re: Scenario C prerequisites (Re: Upcoming: further thoughts on where from here)

Gene Gaines <> Wed, 22 September 2004 21:38 UTC

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Date: Wed, 22 Sep 2004 17:22:08 -0400
From: Gene Gaines <>
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To: Karl Auerbach <>
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Cc: Harald Tveit Alvestrand <>,, scott bradner <>
Subject: Re: Scenario C prerequisites (Re: Upcoming: further thoughts on where from here)
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2 cents.

Assuming IETF is going to set up a corporation and it is to be
created in the United States, it appears to me there are strong
reasons for incorporating as a non-profit, and further to obtain
tax-exempt status as a 501(c)(3) organization.

It appears to me that IETF qualifies for this status easily as
a technical, memberhhip organization, not operated for private
benefit, engaged in creating and publishing information freely
available without charge and in the public domain.

I spoke briefly with a U.S. Internal Revenue Service (IRS) expert
who told me informally that IETF appears to qualify easily for
non-profit, tax-exempt status.

If anyone is interested, I can provide several IRS rulings and
Shephard-qualified court decisions for similar organizations.

The forms to make application are not burdensome, and can be
completed by any competent lawyer (knowledgeable of non-profit
law) and should be part of the process of setting up any IETF
corporate entity.  I emphasize:  Setting up the IETF entity to
properly qualify for non-profit and 501(c) tax-exempt status
_must_ be considered at the time the corporate charter is set up.

Note that the IRS processing time for obtaining 501(c)(3) status
currently is 120 days; this can be shortened by invoking special
circumstances; the effective date will be retroactive to the
date the entity filed for incorporation.  Despite all the folk
tales, the U.S. IRS is not capricious in such cases, and a
qualified lawyer can state with certainty whether the IETF does
or does not qualify. I'm not a lawyer, but am sure the IETF does

Warning.  IETF people travel between countries to attend
meetings.  Security and border restrictions are becoming
increasingly restrictive in the U.S. and many other countries.

I suggest it is imperative that, if the IETF does incorporate,
it obtain non-profit and I recommend tax-exempt status.  It is
important -- critical -- the IETF attendees be seen as traveling
to attend a technical meeting conducted by a non-profit
organization.  Remember the trouble with U.S. people traveling to
Korea for IETF 61?  (We obtained special papers from the Korean
embassy in Washington by claiming the IETF to be part of ISOC,
and ISOC has non-profit status.

It is generally true that visitors to a country for tourism or to
attend non-profit technical meetings are subject to substantially
less restrictions and less paperwork than those traveling for
business purposes.

Further, it is so very important the IETF be transparent, and
its financial dealings be open.  The annual filings required of
U.S. non-profit tax-exempt organizations will provide much of
that transparency.

Last question.  What impact will incorporation, either the
entire IETF organization or only a headquarters activity, have
on ISOC and the support it provides to the IETF?

ISOC is non-profit, 501(c)(3) tax-exempt, incorporated in the
District of Columbia.

I suggest it would be a serious mistake for the IETF not to
obtain the same status.

Gene Gaines
Sterling, Virginia USA

On Wednesday, September 22, 2004, 12:37:36 PM, Karl wrote:

> On Wed, 22 Sep 2004, Jeffrey Hutzelman wrote:

>> I think this and a number of other points made here gloss over a key point of
>> which some of the participants may not be aware.
>> Under US law, there is a significant difference between "not-for-profit" and
>> "charitable nonprofit"....

> It might be useful to add more precision.

> In the US there are two levels from which laws affecting corporations
> arise, state and Federal.  Corporate structures are usually created under
> state law.

> Many states of the US have laws that allow "non-profit" or even
> "charitable nonprofit".  Here in California, for example, there are
> several forms of non-profit: public-benefit, charitable, mutual benefit,
> religious, medical, etc.

> And here in the US we have a lot of states - 50 of 'em - each with its own
> different corporations laws.

> At the federal level there is yet another mountain of law, but we often
> end up talking about tax exemptions under Title 26 Section 501 of the US
> code.  That part of the tax code covers a lot of territory and is very
> complicated and full of subtle distinctions that trigger significant
> differences in treatment as well as imposing rather different kinds of
> limitations and obligations upon the entity that is seeking or obtained
> one or another of these exemptions.

> So, when talking about these things we can avoid a lot of confusion if we
> try to be precise about specific state level conceptions of corporations
> and non-profitness and federal level conceptions of federal tax exemption
> and the benefits, limitations, and obligations that come from each.

> I might add that one of the questions that ought to be raised, and it is a
> question that I'm certainly neither qualified to answer nor will I even
> attempt to answer, is whether the IETF ought to seek Federal tax exempt
> status at all.  Sometimes it may be better to simply file the papers, pay
> the tax money, and be free of many of the restrictions.

>  		--karl--

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