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Mozilla millions still 86% Google cash

Mountain View sugar daddy tax audit rolls on

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Google still provides 86 per cent of Mozilla's revenue, according to the open source outfit's latest financial statement.

On Thursday, Mozilla released its audited financial statement for 2009, and as in previous years, an unnamed search company is listed under "concentrations of risk." In 2008, Google accounted for 91 per cent of Mozilla's revenues, so the risk has dropped. But 86 is still a very large number.

"The Corporation has a contract with a search engine provider for royalties which expires November 2011," the statement says. "Approximately 86% and 91% of royalty revenue for 2009 and 2008, respectively, was derived from this contract."

The statement also says that the unnamed search-engine provider represented 71 per cent and 80 per cent of 2009 and 2009 receivables, respectively.

In 2009, Mozilla's total revenues totaled $104 million, a 34 per cent increase from 2008. With a blog post on its latest financial statement, the open sourcers say that a "majority of Mozilla revenue continues to be generated from the search functionality included in Mozilla's Firefox product from organizations such as Google, Yahoo, Yandex, Amazon, EBay and a handful of others." But a vast majority of that majority comes from Mountain View.

Traditionally, Mozilla prefers not to mention its Google dependence in its blog posts.

Thanks to this longstanding Google dependence, Mozilla is facing an IRS audit, and the open sourcers say they still don't know when this will be resolved. "As noted last year, the IRS has opened an audit of the Mozilla Foundation," the blog post reads. "We do not yet have a good feel for how long this process will take or the overall scope of what will be involved."

Since 2004, Mozilla has collected a portion of all Google search dollars generated by Firefox traffic. In the US and Western Europe, Google is the default home page — and the default option is the search box in the top right-hand corner of the browser. Mozilla now has deals with various other search engines, including — gasp! — Microsoft, and in some cases, Google is not the default. In Russia, for instance, Firefox defaults to the native Yandex. In China, it defaults to Baidu.

With tensions growing between the two organizations, Mozilla's dependence on Google is certainly a reason for concern. But in multiple conversations with The Reg, Mozilla has downplayed the risk, saying that if Google backs out, there's no shortage of others willing to take their place. Following Mozilla's deal with Microsoft, this doesn't ring as hollow as it used to.

Meanwhile, the pending IRS audit could threaten the tax-exempt status of the not-for-profit Mozilla Foundation. The Foundation received tax-exempt status in 2003, and in 2004, it did not pay taxes on $4,422,674 in search dollars (76 per cent of it revenue), saying that an arrangement with "a search provider...facilitates the dissemination of the Foundation's browser, thereby increasing the accessibility of the internet."

Then, in 2005, the Foundation spun off a for-profit operation, and it transferred multiple search-engine contracts to this Mozilla Corporation. That same year, the Foundation set aside a "tax reserve fund" in case the Internal Revenue Service reviewed the tax status of its 2004 and 2005 search-engine dollars.

In 2008, Mozilla announced that the IRS had indeed launched a review of those two years. Mozilla has argued that its 2004 and 2005 search revenues were royalties and should not be taxed, but it realizes that the IRS may not agree.

In early 2009, according to Mozilla's latest financial statement, the IRS expanded its investigation to the tax years 2006 and 2007. But it appears that these portions of the investigation have now been closed. "As of June 30, 2010, there are two remaining issues the IRS continues to challenge. These include the tax classification of the Foundation's 2004 and 2005 search related revenue and any potential impact on the Foundation's public support test calculation as a result of this classification," the statement reads.

In the past, Mozilla has also said that there has been an "inquiry regarding its tax exemption" because Google provides such a large portion of its revenue. "While the Foundation did not automatically qualify as a public charity with public support at 33 per cent of total support, it believes that it qualifies as a public charity under the facts and circumstances test with public support over 10 per cent," Mozilla says.

If it doesn't pass this test, the Foundation continues, it will become a private charity. And it will have to pay additional taxes. ®

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