For the past few years, trying to get tax-exempt status for your open source project has been a non-starter for many. And now we know why. Since at least 2010, the Internal Revenue Service has flagged applications by open source organizations seeking tax except status, according to internal IRS documents released by Congress this week.
According to the documents, open source projects have been flagged by the tax agency's Be On the Look Out, or BOLO, list. This means they received extra scrutiny from the IRS — just like the Tea Party, some progressive organizations, and medical marijuana groups — when they applied for certain types of federal nonprofit status. The fact that open source projects were being flagged by these BOLO lists was first reported by Mother Jones.
That extra scrutiny caused a major scandal for the Obama administration last month, after a Treasury Inspector General for Tax Administration audit found that the IRS's methodology for flagging Tea Party submissions was suspect. This week, we discovered that progressive groups and others — including open source projects — were similarly flagged on these BOLO lists.