Feeds

Mozilla's Google millions - a tax dodge?

Transparency? We've heard of it

Beginner's guide to SSL certificates

When the Mozilla Foundation turns to the public for money, it happily assumes the mantle of a penniless public institution asking for charity. Over 10,000 FireFox fans drew deep into their own pockets to place an expensive two-page advertisement for the browser in the New York Times 15 months ago.

But the Mozilla Foundation's commercial wing, Mozilla Corp., is awash with cash, its accounts reveal. It's just that in the spirit of openness and full disclosure - it er, ... doesn't like to talk about it.

Mozilla Corporation director Chris Blizzard coyly referred to the largesse last week in a weblog post.

"Money is one of the last things we worry about, and people shouldn't get hung up on the numbers, except to realize that it gives us options," wrote Blizzard. But earnings figures of $72 million were "not off by an order of magnitude".

But there's a broader, social dimension to this that's rarely discussed. Both Mozilla and now Opera are able to develop their browsers, and give away them away for free, because of Google's kindness.

Last year, Opera, a publicly-traded company, dropped the $39 fee for the ad-free version of its desktop browser. It said it was able to do this by striking a deal with Google for referrals.

Google represented 76 per cent of Mozilla's income in 2004. As recently as last June, Opera CEO Jon von Tetzchner was referring to Mozilla's "rich sugar daddy" in interviews ... before striking the same kind of deal with Google in the Fall.

Just as the PC giants Intel and Microsoft sewed up their distribution channels - the OEMs - using MDF (Market Development Funds) and discriminatory pricing, Google too realizes the importance of securing its clickstream. Mozilla and Opera ensure there's a "default" for search, and it defaults too Google.

When tax exempt income is not tax exempt income

Mozilla also claims tax-exemption for these payments - when it shouldn't, say critics. Taking money for promoting third parties is obviously advertising, and so is considered taxable.

In January, researcher Daniel Brandt finally obtained the Foundation's 990 form that non-profit organizations are obliged to file, and discovered that Mozilla had filed the Google income as "unrelated business income."

"After reading the IRS material," wrote Brandt, "it seems to me that this claim is not only arrogant, but also fraudulent. The IRS instructions make it clear that if a nonprofit newsletter starts carrying ads, for example, then this advertising income is unrelated business income and is taxable. The IRS also makes it clear that just because an unrelated business activity generates income that is then used to further the exempt function or purpose, this does not by itself qualify that activity as exempt from taxation."

In response, the Foundation's public relations company provided this statement to The Register:

The Mozilla Foundation has handled its past income in a manner that we believe is consistent with the relevant IRS and state rules, and has filed tax returns and related forms accordingly. The creation of the Mozilla Corporation made possible an increased focus on building great products like Firefox and Thunderbird, and as a side benefit allowed the Corporation to take over various income-generating activities and simplify tax-related complexities for the tax-exempt Mozilla Foundation going forward.

There's some irony in a corporation that prides itself on not being evil allying with an open source foundation to produce a business agreement so murky and opaque.

Mozilla's best answer to its critics would be to allow some transparency into its operations. ®

Providing a secure and efficient Helpdesk

More from The Register

next story
Scrapping the Human Rights Act: What about privacy and freedom of expression?
Justice minister's attack to destroy ability to challenge state
WHY did Sunday Mirror stoop to slurping selfies for smut sting?
Tabloid splashes, MP resigns - but there's a BIG copyright issue here
Google hits back at 'Dear Rupert' over search dominance claims
Choc Factory sniffs: 'We're not pirate-lovers - also, you publish The Sun'
EU to accuse Ireland of giving Apple an overly peachy tax deal – report
Probe expected to say single-digit rate was unlawful
Inequality increasing? BOLLOCKS! You heard me: 'Screw the 1%'
There's morality and then there's economics ...
Hey Brit taxpayers. You just spent £4m on Central London ‘innovation playground’
Catapult me a Mojito, I feel an Digital Innovation coming on
While you queued for an iPhone 6, Apple's Cook sold shares worth $35m
Right before the stock took a 3.8% dive amid bent and broken mobe drama
EU probes Google’s Android omerta again: Talk now, or else
Spill those Android secrets, or we’ll fine you
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.