Linux User Group HOWTO: Legal and political issues Next Previous Contents

7. Legal and political issues

7.1 Legal issues

7.2 United States

There is a strong case to be made for formal organization of local LUGs. I will not make that case here. If, however, you are interested in formally organizing your local LUG, then this section will introduce you to some of the relevant issues.

Note: this section should not be construed as competent legal counsel. These issues require the expertise of competent legal counsel; you should, before acting on any of the statements made in this section, consult an attorney.

There are at least two different legal statuses that a local LUG in the United States may attain:

  1. incorporation as a non-profit entity
  2. tax-exemption

Although the relevant statutes differ from state to state, most states allow user groups to incorporate as non-profit entitites. The benefits of incorporation for a local LUG may include limitations of liability of LUG members and volunteers, as well as limitation or even exemption from state corporate franchise taxes.

While you should consult competent legal counsel before incorporating your LUG as a non-profit entity, you can probably reduce your legal fees if you are acquainted with the relevant issues before consulting with an attorney. I recommend the Non-Lawyers Non-Profit Corporation Kit (ISBN 0-937434-35-3).

As for the second status, tax-exemption, this is not a legal status so much as a judgment by the Internal Revenue Service. It is important for you to know that incorporation as a non-profit entity does not insure that the IRS will rule that your LUG is to be tax-exempt. It is possible to have a non-profit corporation that is not also tax-exempt.

The IRS has a relatively simple document that explains the criteria and process for tax-exemption. It is Publication 557: Tax-Exempt Status for Your Organization. It is available as an Adobe Acrobat file from the IRS's Web site. I strongly recommend that you read this document before filing for incorporation as a non-profit entity. While becoming a non-profit corporation cannot insure that your LUG will be declared tax-exempt by the IRS, there are ways to incorporate that will prevent the IRS from declaring your LUG to be tax-exempt. Tax-Exempt Status for Your Organization clearly sets out the necessary conditions for your LUG to be declared tax-exempt.

Finally, there are resources available on the Internet for non-profit and tax-exempt organizations. Some of the material is probably relevant to your local LUG.

7.3 Canada

Thanks to Chris Browne for the following comments about the Canadian situation.

The Canadian tax environment strongly parallels the US environment, in that the ``charitable organization'' status confers similar tax advantages for donors over mere ``not for profit'' status, while requiring that similar sorts of added paperwork be filed by the ``charity'' with the tax authorities in order to attain and maintain certified charity status.

7.4 Political issues

Chris Browne has the following to say about the kinds of inter-LUG political dynamics that often crop up.

People have different feelings about free software.

Linux users are a diverse bunch. As soon as you try to put a lot of them together, there are some problem issues that can come up.There are those that are nearly political radicals that believe that all software, always, should be ``free.'' Because Caldera charges quite a lot of money for their distribution, and doesn't give all profits over to (pick favorite advocacy organization), they must be ``evil.'' Ditto for Red Hat or S.u.S.E. Keep in mind that all three of these companies have made and continue to make significant contributions to free software.

Others may figure that they can find some way to highly exploit the ``freeness'' of the Linux platform for their fun and profit. Be aware that many users of the BSD UNIX variants consider that their licenses that do permit companies to build ``privatized'' custom versions of their OSes are preferable to the ``enforced permanent freeness'' of the GPL as applied to Linux. Do not presume that all people promoting this sort of view are necessarily greedy leeches.

If these people are put together in one place, disagreements can occur.

Leaders should be clear on the following facts:

  • There are a lot of opinions about the GPL and how it is supposed to work. It is easy to misunderstand both the GPL and alternative licensing schemes.
  • Linux benefits from contributions from many places, and can support some freeloaders, particularly if this encourages more people to get involved, thus pulling in further contributors.
  • Many significant contributions have been made to Linux by commercial enterprises. Examining the sources to the Linux kernel, and notable subsystems such as XFree86 and GCC show a surprising number of commercial contributors.
  • Commercial does not always imply ``better,'' but it also does not always imply ``horrible.''

The main principle can be extended well beyond this; computer ``holy wars'' have long been waged over the virtues of one system over another, whether that be (in modern day) between Linux, other UNIX variants, and Microsoft OSes, or between the ``IBM PC'' and the various Motorola 68000-based systems, or between the many 8 bit systems of the 1970s. Or of KDE versus GNOME.

A wise LUG leader will seek to smooth over such differences, rather than inciting them. LUG leaders must have thick skins.

There will be disagreements at some point as diverse views collide with one another, and leaders must be able to cope with this, resolving disagreements rather than contributing to the problem.

Nonprofit organizations and money don't mix terribly well.

It is important to be quite careful in dealing with finances in a nonprofit organization of any sort. In businesses, where profitable flows of monies are the goal, people are not typically too worried about ``nagging details'' such as possible misspending of immaterial sums of money.

The same cannot be said about nonprofit organizations. Some people are involved for reasons of principle, and can easily give minor problems inordinate attention. And the potential for wide participation at business meetings correspondingly expands the potential for inordinate attention to be drawn to things.

As a result, it is probably preferable for there to not be a membership fee for a LUG, as that provides a specific thing for which people can reasonably demand accountability. Fees that are not collected cannot, by virtue of the fact that they don't exist, be misused.

If there is a lot of money and/or other such resources floating around, it is important for the user group to be accountable to its members for it.

In a vital, growing group, there should be more than one person involved. In troubled nonprofit organizations, financial information is often tightly held by someone who will not willingly relinquish control of funds. Ideally, there should be some rotation of duties in a LUG including that of control of the finances.

Regular useful financial reports should be made available to those that wish them. A LUG that maintains an official ``charitable status'' for tax purposes will have to file at least annual financial reports with the local tax authorities, which would represent a minimum financial disclosure for the purposes of the members.

With the growth of Linux-based financial software, it should be readily possible to create reports on a regular basis. With the growth of the Internet, it should even be possible to publish these on the World Wide Web.


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