Running a Tor Server as a Tax Deduction?

[Andrew Lewman]

On 07/08/2009 01:44 AM, Ringo wrote:
> Do people think that running a Tor server could be seen as a donation to
> the Tor Project (which is a 501(c)(3) charity IIRC)? 

This question has come up before, as Brian Puccio mentioned, and comes
up again as The Tor Project is a real 501(c)(3) non-profit corporation.
   I'm not a tax attorney, nor CPA, nor accountant; therefore don't take
this as any sort of legal/tax advice. This topic is still under review
by Tor's legal advisors and accountants.  Consider this a quick overview.

There are two issues:

1) US FASB requirements for valuation of contributed services and if
they create or enhance an asset (for assets Tor can recognize in
financial statements).  One of the key points here is whether The Tor
Project would have to pay for the services versus rely on donations of
those services.

2) Legal risks to the Tor Project for having such assets recognized as
belonging to the Tor Project.

We (accountants and Tor) decided that for 2008, Tor would not pay to run
all of the relays.  The design of Tor and therefore the Tor network is
to rely on a decentralized model of informal volunteers to maintain the
network.

The point of discussion is that Tor would be mostly useless if the
public Tor network didn't exist, so clearly this network could have some
value.  However, in order to recognize that value, the Tor Project would
have to record detailed information about every relay operator in order
to accept the contributed service as an asset, and give the donation
valuation to the relay operator.  This comes back into legal risks, and
reverts back to the privacy by design of the Tor software and Tor
network itself.

To help clarify what this could mean, here's an analogy:  Someone
donates a fully operational military tank to the Tor Project.  While we
suddenly have a tremendous asset on our hands (and financial
statements), we're beholden to all sorts of legal risks for owning and
operating a fully operational military tank as a private entity in the US.

We have the right to refuse donations in kind, and essentially we're
doing that with those of you running relays that make up the Tor
network.  We wholly appreciate your efforts (as do all of the Tor
users); it's just that we can't trade your volunteering for financial
gain on your end (through a tax deduction) at this time.

I realize this isn't the definitive answer of "yes or no" you want, but
it's the best I can offer right now as discussions progress.  The
decision can go either way, and I will keep you updated when a decision
is made, with the explanation.

This doesn't preclude direct donations in kind, such as hosting website
mirrors, our website itself, hosting archives, databases, website
design, graphics/artwork, etc.

-- 
Andrew Lewman
The Tor Project
pgp 0x31B0974B

Website: https://torproject.org/
Blog: https://blog.torproject.org/
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