“What’s in a name? that which we call a rose by any other name would smell as sweet.” William Shakespeare.
A colleague recently brought to my attention an article by Esther Dyson published by the Washington Post on January 17, 2020. The title of the article is “Don’t give your dot-org domain away to a private company.” The gist of the article is that (now stick with me) …
- The Internet Society (IS), a nonprofit 501(c)(3) tax-exempt organization, which reported revenues (contributions and grants) of $35,405,711 on its 2017 Form 990 (which federal tax form must be made available to public by law), is in the process of selling ….
- The Public Interest Registry (PIR), a nonprofit 501(c)(3) tax-exempt organization, which reported revenues (contributions and grants) of $90,784,245 on its 2017 Form 990 (which federal tax form must be made available to the public by law), to …
- Ethos Capital (Ethos), a private equity investment firm, for more than $1 Billion (about $1.135 Billion if Wikipedia is to be believed).
So, why am I writing about what appears to be just another mega-transaction? Well, turns out that PIR is the entity that controls and operates the licensing and registration of the dot-org top level domain names.
I have been practicing law for about 30 years. About 15 years ago, I started to consult with nonprofit and tax-exempt entities which has grown into a substantial part of my practice. Of the dozens of such entities I have consulted with, and of the hundreds of such entities that I have become familiar with through my professional activities, I do not recall a single one whose top level domain (TLD) name did not end with dot-org (.org). What I am trying to point out is that the entire nonprofit tax-exempt universe uses the dot-org TLD name in all aspects of their business activities (website, email, branding, intellectual property, etc.). I am of the opinion the administration of the functional components of the internet, including the licensing and registration of TLD’s (.com, .net, .org, etc.), is nothing short of a public service in the broadest sense – a global public utility. I believe this is particularly the case when it comes to the dot-org TLD.
Wikipedia’s entry for “.org,” includes the following:
“Intended use – Miscellaneous organizations not fitting in other categories (generally noncommercial) (emphasis is mine),” and
“Actual use – Nonprofits; personal sites; open-source projects; some government websites; mostly used by noncommercial entities” (again, emphasis is mine).”
Ms. Dyson in her abovementioned article raises concerns about how a private firm like Ethos might introduce a commercial component to the licensing and administration of the dot-org TLD’s:
“Such an owner would need to earn more by, for example, selling data on dot-org registrants or perhaps upselling registrants to buy special security services, trademark protection or other versions of their dot-orgs – just as other providers encourage for-profit registrants to buy ‘protection’ for their brands. Such profit-making is not inherently evil, but it’s not the purpose for which dot-org or its registrants were created. In the end, the profits should go back to dot-org members, not to some corporation.”
Based on their self-descriptions contained in their Mission statements available on the GuideStar website, one gets the impression that IS and PIR in fact see themselves as something akin to a global public utility:
This from the IS:
The Internet Society supports and promotes the development of the Internet as a global technical infrastructure, a resource to enrich people’s lives, and a force for good in society.
Our work aligns with our goals for the Internet to be open, globally-connected, secure, and trustworthy. We seek collaboration with all who share these goals.
Together, we focus on:
– Building and supporting the communities that make the Internet work;
– Advancing the development and application of Internet infrastructure, technologies, and open standards; and
– Advocating for policy that is consistent with our view of the Internet.”
This from PIR:
ORGANIZATION’S MISSION STATEMENT PUBLIC INTEREST REGISTRY’S EXEMPT PURPOSES ARE: LESSENING THE BURDENS OF GOVERNMENT AS AN INTEGRAL PART OF THE INTERNET SOCIETY (ISOC), SUPPORTING AND ENHANCING THE IMPORTANT MISSION OF ISOC TO FACILITATE, SUPPORT AND PROMOTE THE EVOLUTION AND GROWTH OF THE INTERNET AS A GLOBAL RESEARCH AND COMMUNICATIONS INFRASTRUCTURE.”
So, I think Ms. Dyson raises a valid concern. However, I have additional concerns. The fact is, although the term most commonly used to describe charitable entities is the word “nonprofit,” what is generally, if not almost always intended, consciously or unconsciously, is the term “nonprofit TAX-EXEMPT.” Once again, in my 15 years of legal practice in the nonprofit sector, while I am aware that nonprofits need not seek or obtain tax-exempt status, I have never been involved with one that does not have or seek to have tax-exempt status. Let’s face it folks, without tax-exempt status a nonprofit will struggle at best to attract donors because donors cannot deduct contributions off their taxes unless such contributions are made to TAX-EXEMPT organizations (whose tax-exemption remains valid and in good standing I might add). My point is that the NONPROFIT world in inextricably bound up with the TAX-EXEMPT world and vice-versa. If you are a nonprofit, really, you’re a nonprofit tax-exempt entity. In the United States, to gain tax-exempt status, you need the approval of the IRS. You must make application to the IRS. The application requires tremendous detail about the nonprofit applicant and its founders, officers, directors, and similar parties. While in my experience approval of the application can come as quickly as 3 to 4 months, it can also take a year or more. The scrutiny of the application is great. Furthermore, if tax-exempt status is granted by the IRS, it comes with “strings.”
What are those “strings?” Well, first the nonprofit tax-exempt entity is subject to the multitude of Internal Revenue laws and regulations, etc., that govern tax-exempt entities. It’s a quagmire to say the least. Second, however, is that the nonprofit tax-exempt entity must submit to a not inconsiderable amount of public disclosure and related transparency. If you return to the beginning of this article, I went out of my way to point out that the “information returns” (the IRS Form 990’s) that must be filed each year by a tax-exempt entity, must be made available to the public by law. That’s right, if you are not a monthly subscriber to a service like GuideStar as I am, you only need pick up the phone and call IS or PIR and request a copy of such a return (unless, for example, such returns are freely available via their websites). If you look one over, you will see that these returns contain a great deal of financial and other information. All available to the public. For free. By law. If a nonprofit tax-exempt entity fails to file such forms for three consecutive years, they are at risk of losing their tax-exempt status.
So, to sum up, to a significant extent, the NONPROFIT world is really the same thing as the TAX-EXEMPT world. Similarly, the TAX-EXEMPT world is governed by the IRS which imposes upon the constituents of the TAX-EXEMPT world to a significant extent the requirement that they must exist in a TRANSPARENT world. Finally, as a practical matter, for better or for worse, the dot-org TLD is undeniably bound up with this NONPROFIT, TAX-EXEMPT, TRANSPARENT world. Whether that was intended or not, it is. If fact, on page one of the IRS Form 990, at the top of the page, as part of the information a tax-exempt entity must provide to identify itself (name, address, EIN, basis for tax-exempt status [501(c)(3), etc.], year of formation, state of legal domicile) is the following in bold: “Website.” That’s correct. The IRS includes a tax-exempt entity’s website among the information that identifies the entity! The TLD I have seen on every single Form 990 I have ever reviewed (except those where no website yet exists) is the dot-org TLD. That’s right. The critical document upon which the IRS relies for annual disclosure and transparency requests the website for the tax-exempt entity among the basic information the IRS relies upon to identify the tax-exempt entity.
Any lawyer whose practice includes cyberpiracy and related crimes knows what a fertile and (regrettably) supportive environment the internet provides for such cyber-pirates. Having practiced in this area I would tell you that it vacillates between sad and maddening. The cyber-pirates can obtain TLD’s and set up websites using those TLD’s with near-complete privacy. They can then contract with e-Fulfillment centers to ship their pirated and counterfeited booty all over the world, once again with near-complete privacy. The victimized business often must file a lawsuit to even begin to have a chance to break through the wall of privacy. By that time, in many cases, the damage is done, and the cyber-pirates have sailed on.
Admittedly, in the first instance at least, the sale of PIR from IS to Ethos should not necessarily increase the incidents of cyberpiracy. But I assure you, the battle against cyberpiracy desperately needs more, not less, transparency. Allowing the control and operation of the licensing and registration of dot-org TLD’s to move from the TAX EXEMPT and TRANSPARENT world to the private and presumably non-transparent world is not helpful. I assume that Ethos will not be filing a public document such as the IRS From 990 to allow the dot-org world to see into its financial and related operations. As alluded to above, Ethos will be administering what IS and PIR themselves seem to acknowledge is the equivalent to a global public responsibility, if not a global public utility. I, for one, do not think this is a good idea.
As quoted above, Shakespeare famously wrote, “What’s in a name? that which we call a rose by any other name would smell as sweet.” The situation described in this article is actually the reverse. The (TLD) name may remain the same (dot-org) but what goes on behind it may change as the world that licenses and registers the dot-org TLD’s becomes less transparent.