Mozilla Foundation Forms Taxable Subsidiary

I’m back, and rather tiredly working through the large backlog of almost 1000 non-spam Mozilla-related emails.

As you all will be aware, the big news during my absence was the formation of a new taxable subsidiary of the Mozilla Foundation, called the Mozilla Corporation. When it became clear that continuing with our current structure could jeopardise the Foundation’s non-profit tax-exempt status, several options were examined and this was seen as the best way forward. I was honoured to be invited to be part of the Advisory Committee which helped the Mozilla Foundation board to steer its way through the complicated legal, organisational, financial, ownership, communication and other issues involved.

As Frank Hecker’s blogpost mentioned, he is the new Director of Policy for the Foundation, and I am staying with the Foundation rather than moving to the subsidiary with the rest of the current Foundation employees. In fact, I was hired by the Foundation last month with exactly this in mind. We are joined by Zak Greant, who I believe I met briefly at EuroFoo 2004; all three of us currently work part-time.

Some of you may not bet too familiar with Frank’s previous work for the project, which has been rather behind the scenes. He and I have collaborated in the past on the CA certificate policy and other security and policy issues, and I have great respect for his clarity of analysis. He is exactly the right person for the job, and I’m very excited to be working for him.

Frank is currently offline for personal reasons, so I don’t want to start making grand statements about the future activities of the Foundation. However, one area we hope to turn our attention to sooner rather than later is the issue of governance. Now that the Foundation and the Corporation are separate, it gives those of us in the Foundation a chance to step back and look at things such as the role of staff. In the near future, we hope to establish a mechanism within the community for having those very important discussions.

It seems that most of the questions about the formation of MozCo have been answered over the past few days; however, if any still remain that you think I can answer, feel free to ask them here.

5 thoughts on “Mozilla Foundation Forms Taxable Subsidiary

  1. Something must be incorrect in my understanding here:

    MoFo (not-for-profit) owns MozCom (for-profit). MoFo can still receive tax exempt donations. MozCom can generate non-tax-exempt revenue. MoFo can continue to fund development by giving money to MozCom. Excess revenue generated by MozCom may or may not go back to MoFo.

    If its that simple, is it somekind of tax loophole that every corporation would love to exploit, but maybe not everyone knows about it yet?

  2. As it has been said at various places, there are limits to what an tax-exempt body can do.

    Other than that, cycling money is hard, yes, but you will see that it doesn’t get more and more and more. Keep in mind that tax-exempt usually (at least in those laws that I’m not familiar with) includes a maximum budget, at least in time. You can only keep some particular amount of cash for that long. So you can’t park money in the tax-exempt part. It’s much more the other way around. You have to pay taxes on that money, but at least you can spend the rest when you feel like it.

  3. vfwlkr: where’s the loophole? If MozCo donates money to the MoFo, tax will already have been paid on it – no dodge. It can also funnel money back internally without paying tax on it, but that is limited to a certain proportion (1/3, I believe) of the MoFo’s total income.

  4. The loophole (or my flawed understanding) is the other way round. Wouldnt every for-profit orgnanisation want to create a tax-exempt, not-for-profit parent?

    That would allow it to receive tax-exempt funding, even though its primarily a regular, for-profit organisation?

  5. vfwlkr,

    Why would every company want to do that? Most companies exist to make money for their owners, investors, or stock owners. If they created non-profit parent companies, I, the investor get jack. No way would I invest. That would change everything and the company would still see its income taxed (and by the way, who wants to make donations to a for-profit company?). So, as far as I can see, there are few to no for-profit companies that would want this setup. However, if the Mozilla Foundation/Corporation works, other non-profits may want to pursue this to find business relationships and profit easier to deal with.