[ALAC] ICANN as a 501(c)(3) Organisation

Olivier MJ Crepin-Leblond ocl at gih.com
Tue Apr 25 06:10:12 UTC 2017


Dear Alan,

as a follow-up to my explanation on the ALAC mailing list about ICANN
being a 501(c)(3) organisation, the relevant Article of Incorporation
paragraph is:
(Ref: https://www.icann.org/resources/pages/governance/articles-en )

/Article 2.I.II:
This Corporation is a nonprofit public benefit corporation and is not
organized for the private gain of any person. It is organized under the
Nonprofit Public Benefit Corporation Law for charitable and public
purposes. The Corporation is organized, and will be operated,
exclusively for charitable, educational, and scientific purposes within
the meaning of § 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the “*Code*”), or the corresponding provision of any future
United States tax code. Any reference in these Articles to the Code
shall include the corresponding provisions of any future United States
tax code. In furtherance of the foregoing purposes, and in recognition
of the fact that the Internet is an international network of networks,
owned by no single nation, individual or organization, the Corporation
shall, except as limited by _Article IV_ hereof, pursue the charitable
and public purposes of *lessening the burdens of government and
promoting the global public interest *in the operational stability of
the Internet by carrying out the mission set forth in the bylaws of the
Corporation (“*Bylaws*”). Such global public interest may be determined
from time to time.  Any determination of such global public interest
shall be made by the multistakeholder community through an inclusive
bottom-up multistakeholder community process.

Article 2.IV:
Notwithstanding any other provision of these Articles:
a. The Corporation shall not carry on any other activities not permitted
to be carried on (i) by a corporation exempt from United States income
tax under § 501(c)(3) of the Code or (ii) by a corporation,
contributions to which are deductible under § 170(c)(2) of the Code.
b. No substantial part of the activities of the Corporation shall be the
carrying on of propaganda, or otherwise attempting to influence
legislation, and the Corporation shall be empowered to make the election
under § 501 (h) of the Code./

So what does the § 501(c)(3) tax code say? http://bit.ly/1Va1vVt

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code,
an organization must be organized
<https://www.irs.gov/charities-non-profits/charitable-organizations/organizational-test-internal-revenue-code-section-501c3>
and operated
<https://www.irs.gov/charities-non-profits/charitable-organizations/operational-test-internal-revenue-code-section-501c3>
exclusively for exempt purposes
<https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3>
set forth in section 501(c)(3), and none of its earnings may inure
<https://www.irs.gov/charities-non-profits/charitable-organizations/inurement-private-benefit-charitable-organizations>
to any private shareholder or individual.


Exempt purposes:

https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3

/The exempt purposes set forth in section 501(c)(3) are charitable,
religious, educational, scientific, literary, testing for public safety,
fostering national or international amateur sports competition, and
preventing cruelty to children or animals.  The term /charitable/ is
used in its generally accepted legal sense and includes relief of the
poor, the distressed, or the underprivileged; advancement of religion;
advancement of education or science; erecting or maintaining public
buildings, monuments, or works; *lessening the burdens of government*;
lessening neighborhood tensions; eliminating prejudice and
discrimination; defending human and civil rights secured by law; and
combating community deterioration and juvenile delinquency./

So "lessening the burdens of government" is clearly the key reason for
ICANN to operate as 501(c)(3), but as you can see there are other
possible purposes. (As a side track, it is particularly important to
note the "global public interest" part of the mission which is still
undefined and unresolved.)

With the new gTLD program generating a large income, ICANN needs to be
very careful and show sustained support for "lessening the burdens of
government" - thus support all sorts of Internet-related activities
outside of ICANN. Not doing so, it could be accused of "excess benefit
transactions"
https://www.irs.gov/charities-non-profits/charitable-organizations/intermediate-sanctions-excess-benefit-transactions
and be sanctioned. ICANN needs to walk a very fine line on this. I am
not a US tax attorney and have very little knowledge of the matter, but
it is my understanding that if ICANN was to stop supporting initiatives
in the wider Internet ecosystem space, activities related to ICANN but
not *strictly* relating to Names and Numbers, it would risk losing its
501(c)(3) status.

This loss of 501(c)(3) status is completely independent of the point of
view that some are holding that ICANN is spending too much money outside
ICANN core activities.

It is also worth noting that adhering to the conditions for retaining
501(c)(3) status will be a key issue for the allocation of Auction funds.

I really think that we should fully play this card when it comes down to
use of funds in ICANN. The At-Large Community is part of this "promoting
the global public interest" and we need to remind everyone about this
regularly.


Kindest regards,


Olivier


-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://atlarge-lists.icann.org/pipermail/alac/attachments/20170425/0da8bdfa/attachment.html>


More information about the ALAC mailing list