Scenario O (was: Re: Upcoming: further thoughts on where from here)

John C Klensin <john-ietf@jck.com> Wed, 22 September 2004 05:02 UTC

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Date: Tue, 21 Sep 2004 23:50:39 -0400
From: John C Klensin <john-ietf@jck.com>
To: scott bradner <sob@harvard.edu>, ietf@ietf.org
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Subject: Scenario O (was: Re: Upcoming: further thoughts on where from here)
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(time to change the subject line enough to do some
differentiation)

--On Tuesday, 21 September, 2004 20:33 -0400 scott bradner
<sob@harvard.edu> wrote:

> re: 3/ Of course, there can be no assurance that a corporation
> will be tax exempt unless 1/ it already is, or 2/ the IRS
> rules that it is. Scenario O covers the 1st case since the
> ISOC is already tax exempt. The only way to be sure in
> Scenario C is to wait until the IRS acts and that could be
> many months.  If the 3rd item is truly a prerequisite then,
> even if we incorporated the IASF (not a name that rolls of the
> tongue) next week the IRS might not rule until next summer.

Scott (and others), 

Let me add one observation to this to complement Karl's
observation, but without his legal expertise and perspective.  

The assumption that tax exempt status will be both a sure thing
and quick is, IMO, symptomatic of some of the extreme and
unrealistic optimism in Scenario C.  I would describe many of
the points of that document as "if everything goes perfectly and
without a snag then wonderful results will occur".  Life is
sometimes not that way, indeed, it is rarely that way.   We can
hope for the best but should,  realistically,  design for the
worst or nearly-worst.

To take this one as an example, there are definitely cases in
which IRS approval of tax exempt status is nearly guaranteed and
usually comes quickly.  In my experience --and I have had some
experience with this-- one of those cases involves the term
"church" and  another involves an institution which is clearly
(and purely) educational in nature and that meets several other
conditions about, e.g., how money is handled and for what
purposes.  While some people behave toward the IETF as if it
were a religion, the base organization doesn't fall into either
category and a foundation (or equivalent) set up to service or
support it wouldn't either.  Karl or someone else who knows
should confirm this, but my impression is that, to qualify for
tax-exempt charitable status, it is not sufficient to be
non-profit: there are a number of other necessary conditions
about what one can or cannot do and, to the degree to which part
of the purpose of a standards body is to influence the market,
there are even some gray areas that would call for review and
interpretation.  That situation makes statements conditioned on
comments like "...the fairly clear non-profit nature of the
IETF" (Appendix C, paragraph 3) feel a little bit like
overconfident, misleading, handwaving.

Could we get lucky?  Yes.  Could we get really unlucky and see
either a two year (or more) delay or an outright rejection?
Also yes.  Does the nature of the critical path problems permit
us to risk waiting around for a few years to get a
determination?  Well, I suggest that, if it does, the problems
are not that critical (see my earlier notes about what the
problem is that we are trying to solve).   But to say, as
Appendix C does, "several months or even longer in some cases"
is, intentionally or not, seriously misleading about the
character and extent of that risk.  The third paragraph of
Appendix C then goes on to mention the possibility of an
"interim plan" until (!) tax-exempt status is granted.  But that
plan is not discussed and, given the other issues here, it seems
key if we are not willing to either move forward without the
"assurance that the corporation will have tax-exempt status"
that 2.2 requires or to be willing to delay solving an allegedly
critical-path problem until that status is granted.

Given all, or even a significant fraction, of the above, I don't
see how the approval sequence of 2.2 can possibly work.   No
amount of "consultation with legal counsel" can "assure"
tax-exempt status on any particular schedule.  Instead, such
consultation can do exactly what the document suggests, i.e.,
maximize the likelihood of its being granted.  Assuming we
actually care about solutions to the critical-path problems --
and I certainly hope that is the case-- I don't see how
consensus can validly be determined in the absence of either a
firm schedule for this process going into operation, or
tax-exempt status already being in place, or, perhaps, all of
the details of the "interim plan" being worked out (which, of
course, requires that there be such a plan and that an approval
mechanism for it be incorporated into 2.2).

So I don't see Scenario C as being a superset of Scenario O, or
of having any of the other relationships that have been
suggested.  I just don't see it as hanging together, at least as
now written.

    john





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