Can an employee of a non-profit sign CLA and contribute to open source project under a copyright of a for-profit
<p>I am mostly thinking in the context of USA.</p>
<p>If there is a non-profit <code>X</code> 501(c)(3) with an employee <code>A</code>. Can this employee <code>A</code> contribute during work hours to an open source project which requires them to sign a CLA for contributions they are making to this open source project. This contribution is with full knowledge and approval by the non-profit itself, in fact, <code>A</code> is directed by the non-profit to do this.</p>
<p>This open source project is managed by an organization <code>Y</code>, which is a for-profit and it also holds copyright over the source code of the project (thus why they require a CLA to be signed), but the source code is available to the public under an open source license. But the for-profit <code>Y</code> also uses this code to provide for-profit services/products.</p>
<p>So in a way to me it looks like it should be reasonable to contribute, this is how open source works. But on the other hand it is assigning IP from non-profit to for-profit without for-profit paying for that. So I am not sure what to make of this.</p>
<p>There are also different possibilities what this open source project means to the non-profit (GitLab is used just an example, they are not really using CLAs):</p>
<ul>
<li>It could be something which is directly aligned with the mission of the non-profit. For example, a non-profit which helps educators use GitLab to communicate with students through issues and comments and code snippets. They want to contribute a feature to improve something on  GitLab.</li>
<li>GitLab is just used by the non-profit internally for project management.</li>
</ul>
<p>There are multiple types of CLAs (e.g., one when you assign your rights to the organization <code>Y</code>; one where you just give the organization <code>Y</code> full license to your contribution, but you keep the rights). Is there are difference between them related to this question?</p>
<p>There are different open source licenses out there. Does picking one or the other change anything in the context of this  question?</p>

<h2>What you're talking about is <em>private benefit</em>.</h2>
<p>The nonprofit does labor that benefits a for-profit entity (which can include a natural person). <a href="https://www.irs.gov/pub/irs-tege/eotopicc90.pdf" rel="nofollow noreferrer">That is somewhat different from <em>inurement</em></a>, which is when the private benefit goes to insiders.</p>
<p>It would be inurement if the nonprofit <code>X</code> and for-profit <code>Y</code> overlapped in Board of Directors, management, or ownership, or if nonprofit employee <code>A</code> held substantial interest in <code>Y</code>.</p>
<p>As IRS says, &quot;A little inurement goes a long way&quot;, a motorcycle club lost its status for giving refreshements and items to its members (for 8% of budget, however).</p>
<p>Fortunately, this is not inurement.  IRS says &quot;In the charitable area, some private benefit may be unavoidable. The trick is to know when enough is enough.&quot;</p>
<h2>If the contribution is minor and incidental</h2>
<p>Then in my opinion the organization has little to worry about.  It is obtaining open-source software at no cost that it would otherwise have to pay for at retail. Contributions back into open-source projects are normal.  Its contributions are modest in scale (they're not writing the software <em>for</em> company <code>X</code>) in terms of both the size of the software and the size of the nonprofit's activities.</p>
<p>It doesn't appear as a major activity or cost center to the nonprofit.  (IRS requires documenting the top 3).</p>
<p>The private benefit to <code>X</code> is insubstantial and indirect: it's not like the nonprofit wrote a &quot;nonprofit module&quot; which <code>X</code> turned around and sold as a content pack.</p>
<h2>The contribution is <em>substantial</em></h2>
<p>Then the nonprofit forms a subsidiary for-profit corporation or corp-taxed LLC.  It is certainly permissible for a nonprofit to own 100% of the stock in a for-profit; this doesn't even count as unrelated business income since dividends are exempt from that. The subsidiary operates in a for-profit form, and pays its own income tax.</p>
<p>The only issue is the for-profit needs to have a viable business model and a rational chance at a profit;  it can't be a sham corporation that was created solely to extract money from the nonprofit.</p>

open-source-software