Comment Re:They've got a point. (Score 4, Interesting) 228
I recommend reading the excellent IRS writeup posted at http://yorba.org/docs/IRS-dete... by the way.
One of the key phrases:
Developing Open Source Software Is An Activity Ordinarily Carried On As An Incident To Commercial Or Industrial Operations
In a nutshell, Yorba failed to properly differentiate themselves from a traditional for-profit company. As a for-profit software company owner, I'd say that that's a fair statement. If Yorba was actively engaging in outreach to provide free software to schools (and then incidentally released it to the public), again that would be different.
When you apply for 501(c)3 status you're asking that the general public subsidize your business. Its not unreasonable to require a significant burden of proof before such a federal subsidy is granted.