[Chapter-delegates] ISOC's regional engagement

Wed Sep 20 08:44:50 PDT 2023

Dear Vint, Andrew,

thank you for your responses. The ambiguity was about "public support" 
which I had interpreted as in 
https://www.collinsdictionary.com/dictionary/english/public-support and 
not as "financial support" which you clearly explained in your reply. I 
thought there was an issue of the Internet Society's campaigns not 
gaining the support they needed from the public, and as a Chapter chair, 
I was concerned about this because I thought the Internet Society was 
doing a reasonably good job given the funds it had to devote to this and 
the stringent rules under which it would use these funds.
I was not aware of the rules that the Internet Society is subjected to. 
In some countries, the rules are very different and "public funding" is 
defined as subsidies which are received from the government.
Kindest regards,

Olivier

On 20/09/2023 16:44, Andrew Sullivan via Chapter-delegates wrote:
> Hi,
>
> This note replies to three messages at once, and they're interleaved, 
> because they're all related.  It's also long.  I didn't have time to 
> write a short message, so I wrote a long one instead.
> On Wed, Sep 20, 2023 at 11:49:52AM +0200, Olivier MJ Crépin-Leblond 
> wrote:
>
>> On 15/09/2023 19:59, Andrew Sullivan via Chapter-delegates wrote:
>>> Our income is not keeping up with our expenses and we have not been 
>>> able to attract the level of public support that we need to do, and 
>>> there isn't anything else left to cut, so we had to make a difficult 
>>> decision about where to retrench.
>>
>> Thank you for your explanatory note. Always sad to see people go. One 
>> thing that caught my eye was the above sentence which contains some 
>> ambiguities. Would you please be so kind to flesh this out? I just do 
>> not want to misinterpret the first part of the sentence relating to 
>> income and public support.
>
> I'm not entirely sure I get the ambiguity, but it might be that I used 
> a term of art with "public support".  That's a kind of income.  As 
> Vint said in his helpful message…
>
> On Wed, Sep 20, 2023 at 07:52:47AM -0400, vinton cerf wrote:
>> Olivier, et al,
>> to maintain 501(c)(3) status in the US (ie tax credit for donors to the
>> organization), ISOC has to show broad support from the public.
> […]
>> Andrew, please correct me if I have misstated this.
>
> …under IRS rules, public charities such as ours need to show "public 
> support".  Because the R in IRS stands for "revenue", they interpret 
> "public support" according to the sources of income that the charity 
> has.  This is the so-called public support test. Charities demonstrate 
> this in their Form 990 on Schedule A.  Our 990s are posted at 
> https://www.internetsociety.org/about-internet-society/organization-reports/#financial-reports.
>
> The way this test works is complicated, but as Vint said the basic 
> idea is that a charity should get 1/3 of its income from contributions 
> that represent 2% or less of the organization's total income.  Things 
> that are not contributions count towards income but obviously not 
> towards contributions (so they have negative effects on public 
> support).  Things that are contributions in _excess_ of that 2% go 
> into a category called "excess contributions", so they also add to the 
> total income but can have negative consequences for public support.  
> The test works over a 5 year period.
>
> Charities can drop below the 1/3 public support proportion and remain 
> a charity if they meet certain facts and circumstances, but under no 
> condition is public support allowed to fall below 10%. If a charity 
> does fall below 10% in any two years in a row, it automatically 
> becomes a private foundation (and in the year when it first fell below 
> 10%, which means that once you cross that threshold you have to behave 
> as a private foundation anyway).
>
> For many years (since before I started in this job), the Internet 
> Society has used facts and circumstances to justify its charitable 
> status.  The contributions we are able to take from PIR have also been 
> flat now for many years: we can't take any more money from PIR or we 
> will fail to meet our obligations and cease to be a charity.  (This is 
> all available to be learned from the 990s, by the way.)
>
> This is why we have been focussed as much as we have been (some of you 
> have commented on it) on fundraising.  The only good way for us to get 
> out of this situation is to increase the funds available to us by 
> increasing contributions to the Internet Society.  We have had some 
> successes, but not as much as needed to continue at the size we were, 
> much less to get to 1/3 of our revenue.
>
> We are also obligated to maintain our charitable programs, which 
> includes continuing to support our community.  If we fail to do that, 
> then we will not have facts and circumstances to point to in order to 
> demonstrate that we are in fact a charity.  This is also, by the way, 
> why even the tiniest donation on the part of members -- even $1 -- 
> makes a difference: if an organization has a lot of donors but they're 
> all giving very small amounts such that the organization doesn't make 
> 1/3 of its income from those donations, it still has a strong argument 
> for the IRS that the facts and circumstances show the organization is 
> a charity and undertaking charitable activities.
>
> All of this said, if our contribution income does not expand, we 
> cannot take more money from the one source that still has excess we 
> could claim, and our costs go up, we cannot balance our budget (and we 
> must).  So, we have to cut costs, and that's what we were forced to do 
> last week.  Nothing in my time at the Internet Society pained me as 
> much as having to do this.
>
> The good news is that, in my opinion, reaching 1/3 of our income from 
> public support should be entirely possible, though not overnight.  If 
> we assume our current budget, which is about $39M/year, we need 
> roughly $13M in contributions per year.  Now, the greater New York 
> City area has a population just under 20 million.  Suppose we could 
> convince _half_ of them to give us 10¢ a month. (Yes, this is absurd.  
> It'd cost you more than 10¢ to make a 10¢ donation.  That's part of 
> the point.)  If we were able to do that, we would have about 
> $12M/year.  I am quite confident that the Internet Society does things 
> that are worth 10¢/month to people.  Now we just need to convince 
> them.  That is going more slowly than I would like, but our emphasis 
> over the last few years in making our work measurable has been very 
> much with the goal of convincing donors of the importance of our work.
>
> Finally, I will also say, I am not content with the overall size of 
> our budget.  Those who are sometimes lined up against us -- those who 
> want to undermine the Internet -- are nation-states who can literally 
> print money, and some of the best-capitalized corporations in the 
> history of capitalism.  For our part, including the Foundation, we 
> have a staff cohort of about 160 people, a total annual budget in the 
> area of $50M, and a small but devoted community of volunteers.  This 
> is a completely uneven fight, and we need to expand our efforts to 
> remind everyone in the world that the Internet is a resource to enrich 
> people's lives and a force for good in society.  We're the only people 
> who are devoted to defending the Internet, and to do that we need 
> financial resources.
>
> On Wed, Sep 20, 2023 at 03:23:38PM +0300, Hank Nussbacher via 
> Chapter-delegates wrote:
>> On 20/09/2023 14:52, vinton cerf via Chapter-delegates wrote:
>>
>> Based on:
>> https://www.internetsociety.org/wp-content/uploads/2022/12/
>> Internet-Society-Action-Plan-2023-EN.pdf
>> [cid]
>>
>> 73% of ISOC's budget comes from PIR.
>
> The public support test is more complicated than that (see above), but 
> those figures were accurate for this year's budget.
>
> I hope this message is helpful.
>
> Best regards,
>
> Andrew
>

-- 
Olivier MJ Crépin-Leblond, PhD
http://www.gih.com/ocl.html
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