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This is definitely true. The Yorba Foundation is a recent relevant example where the tax code failed.

I think the risk that the IRS is trying to mitigate is for companies to establish a development only organization and single-licensing it to a shell to sell. We will need to find a nice dividing line that pushes FOSS causes forward while simultaneously preventing the creation of loop holes exploitable by for-profit entities.

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> I think the risk that the IRS is trying to mitigate is for companies to establish a development only organization and single-licensing it to a shell to sell.

That seems easy to fix. Require that the software be available to the general public under the same terms. Which is probably how it already is, if I recall correctly a non-profit can't exist solely to benefit a private party.

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