Dear Alan,

as a follow-up to my explanation on the ALAC mailing list about ICANN being a 501(c)(3) organisation, the relevant Article of Incorporation paragraph is:
(Ref: https://www.icann.org/resources/pages/governance/articles-en )

Article 2.I.II:
This Corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for charitable and public purposes. The Corporation is organized, and will be operated, exclusively for charitable, educational, and scientific purposes within the meaning of § 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), or the corresponding provision of any future United States tax code. Any reference in these Articles to the Code shall include the corresponding provisions of any future United States tax code. In furtherance of the foregoing purposes, and in recognition of the fact that the Internet is an international network of networks, owned by no single nation, individual or organization, the Corporation shall, except as limited by Article IV hereof, pursue the charitable and public purposes of lessening the burdens of government and promoting the global public interest in the operational stability of the Internet by carrying out the mission set forth in the bylaws of the Corporation (“Bylaws”). Such global public interest may be determined from time to time.  Any determination of such global public interest shall be made by the multistakeholder community through an inclusive bottom-up multistakeholder community process.

Article 2.IV:
Notwithstanding any other provision of these Articles:
a. The Corporation shall not carry on any other activities not permitted to be carried on (i) by a corporation exempt from United States income tax under § 501(c)(3) of the Code or (ii) by a corporation, contributions to which are deductible under § 170(c)(2) of the Code.
b. No substantial part of the activities of the Corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the Corporation shall be empowered to make the election under § 501 (h) of the Code.

So what does the § 501(c)(3) tax code say? http://bit.ly/1Va1vVt

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual.


Exempt purposes:

https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3

The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.  The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

So "lessening the burdens of government" is clearly the key reason for ICANN to operate as 501(c)(3), but as you can see there are other possible purposes. (As a side track, it is particularly important to note the "global public interest" part of the mission which is still undefined and unresolved.)

With the new gTLD program generating a large income, ICANN needs to be very careful and show sustained support for "lessening the burdens of government" - thus support all sorts of Internet-related activities outside of ICANN. Not doing so, it could be accused of "excess benefit transactions" https://www.irs.gov/charities-non-profits/charitable-organizations/intermediate-sanctions-excess-benefit-transactions and be sanctioned. ICANN needs to walk a very fine line on this. I am not a US tax attorney and have very little knowledge of the matter, but it is my understanding that if ICANN was to stop supporting initiatives in the wider Internet ecosystem space, activities related to ICANN but not *strictly* relating to Names and Numbers, it would risk losing its 501(c)(3) status.

This loss of 501(c)(3) status is completely independent of the point of view that some are holding that ICANN is spending too much money outside ICANN core activities.

It is also worth noting that adhering to the conditions for retaining 501(c)(3) status will be a key issue for the allocation of Auction funds.

I really think that we should fully play this card when it comes down to use of funds in ICANN. The At-Large Community is part of this "promoting the global public interest" and we need to remind everyone about this regularly.


Kindest regards,


Olivier