The US Internal Revenue Service has ushered in a new and much more favorable treatment for free software projects seeking to have 501c3 tax exempt non-profit organizations of their own. After years of suffering from a specially prejudicial environment at IRS, free software projects—particularly new projects starting out and seeking organizational identity and the ability to solicit and receive tax-deductible contributions for the first time—can now do so much more easily, and with confident expectation of fast, favorable review. For lawyers and others counseling free software projects, this is without question “game-changing.”

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There has been a growing interest among Free and Open Source Software (“FOSS”) projects in the use of crypto-currencies such as Bitcoin and its myriad derivatives (hereinafter “Bitcoin”). However, uncertainty over the treatment of these currencies by US law has dissuaded developers from from using Bitcoin. This post provides some general guidance on the legal consequences of using such convertible virtual currency.

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