Mozilla Foundation to Pay $1.5 Million to Settle Up with the IRS

For years now, a lot of people have misunderstood how the nonprofit Mozilla Foundation works. It is, of course, one of the most influential entities in all of open source, but Mozilla gets the vast majority of its revenues from Google, in exchange for favorable search placement in the Firefox browser, which benefits Google. According to the nonprofit law blog, last year the Mozilla Foundation got 88 percent of its revenues from Google.

The IRS has been investigating the Mozilla Foundation with an eye toward the taxes that it pays, and the good news for Mozilla fans is that Foundation Chairman Mitchell Baker has announced that Mozilla is getting off with a very light $1.5 million tax bill.

The nonprofit law blog has laid out what the issues between the IRS and the Mozilla Foundation were:

" Apparently, the issue is whether the foundation qualifies as a public charity or private foundation, and central to the dispute is the fact that last year the Foundation received 88% of its revenues from Google as part of an agreement that causes the Firefox browser to default to a Google search page. The Mozilla Foundation apparently is taking the position that these revenues are 'royalties' and thus are excluded from the public support test for public charity status under Code Section 509(a)(1) via 170(b)(1)(A)(vi)."

Mitchell Baker's post updating everyone on the situation says:

"In 2008 the US Internal Revenue Service opened an audit of the Mozilla Foundation. I’m happy to note that we’ve settled the issues raised and the IRS recently closed the audit. We entered into a settlement, under which the Mozilla Foundation paid the IRS US $1.5 million. As a result of this settlement, $15 million in funds we had held in reserve pending the resolution of the audit are now available to support the Mozilla Foundation’s mission to support innovation and opportunity on the web."

So Mozilla had laid aside $15 million--10 times the final settlement amount--to resolve this issue. The $1.5 million bill looks like good news for fans of Mozilla and Firefox.