For four years, the IRS has been poking around Mozilla's lucrative deal with Google. Today, the makers of the Firefox Web browser shared some good news: Mozilla has settled with the taxman.
The Mozilla Foundation will pay $1.5 million, Mitchell Baker, chair of the foundation, said in a blog post.
Even more good news, the foundation gets to keep its nonprofit status. And the best news of all is that Mozilla now has a windfall of $15 million from the fund it had set aside to pay potential taxes. It can now spend this money on its projects.
Mozilla's tax nightmare came from its search deal with Google. In 2004, Mozilla started including Google as a default search engine, with Google paying a share of ad revenues it generated. In 2008, they signed a three-year renewal. That deal and other similar ones turned into a whole lot of money for the nonprofit—$68 million in 2008 and, by 2010, more than $100 million.
It was good for Google, too, because placement in the Firefox browser helped boost Google's market share. The search giant turned around and signed a second three-year deal with Mozilla in 2011, for even more money—some $300 million a year, AllThingsD reported at the time.
In 2005, Mozilla had the foresight to set up a wholly owned subsidiary, the Mozilla Corporation, and transferred the Google deal to the corporation. But the IRS wanted to make sure that the nonprofit arm, the Foundation, was paying its fair share of taxes, and complying with other nonprofit regulations.
So the IRS began its audit, and Mozilla has been waiting for the shoe to drop ever since. The period before it set up the corporation, from 2004 to 2005, was still a trouble spot in 2010, according to a Mozilla financial report. (Some nonprofits have to pay out a set percentage of their endowment every year, but Mozilla had registered as a "public charity," a type which doesn't have to.)
The reaffirmation of Mozilla's corporate structure is important to the whole open-source community. Mozilla offers others a rare example of how an organization can make money while giving all of its software away for free. And Mozilla has become a highly sought-after place to work for many software developers, too.
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