[CCWG-Accountability] Regarding Non-profit and public-benefit legal structure

[Robin Gross]

Speaking as a California attorney, being a non-profit corporation doesn't actually mean that the corporation doesn't make a profit.  It means that the profit made by the corporation isn't distributed to share-holders (owners).   So ICANN can make a gazillion dollars in profit, as long as that profit is spent by the corporation in ways other than share-holder distributions.

Best,
Robin

On Jan 6, 2015, at 5:50 PM, Phil Buckingham wrote:

> Hello Bruce,( & Greg),
> 
> Thanks for your sterling work here as Board liaison. 
> 
> What I can't get my head around is that ICANN is projecting / budgeting 15M
> gTLD registrations ( down from an original 33M ) by the end of 2015 ( I
> think ) , maybe 2016.
> With each new registry(1400) paying $25000 pa + 25cents for each
> registration over 50000 to ICANN + potential huge $M from auctions - how can
> ICANN be called a "not for profit " anymore. Surely its tax and legal status
> will have to change ( under Californian law). (This is where a UK accountant
> bows out).
> 
> Perhaps I'm going too deep / off  topic now. 
> 
> Regards,
> 
> Phil
> 
> 
> 
> -----Original Message-----
> From: accountability-cross-community-bounces at icann.org
> [mailto:accountability-cross-community-bounces at icann.org] On Behalf Of Bruce
> Tonkin
> Sent: 06 January 2015 23:54
> To: accountability-cross-community at icann.org
> Subject: [CCWG-Accountability] Regarding Non-profit and public-benefit legal
> structure
> 
> Hello Phil,
> 
> 
>>>  I would envisage the Board having to be compliance with all Corporate
> Governance Codes specific to Companies Law in the country of incorporation,
> subject to a community consensus override. But what is its corporate status
> - not for profit or for profit - as different codes would  apply ? 
> 
> The legal status  of ICANN is as specified in its articles of incorporation:
> 
> https://www.icann.org/resources/pages/articles-2012-02-25-en
> 
> "This Corporation is a non-profit public benefit corporation and is not
> organized for the private gain of any person. It is organized under the
> California Non-profit Public Benefit Corporation Law for charitable and
> public purposes. The Corporation is organized, and will be operated,
> exclusively for charitable, educational, and scientific purposes within the
> meaning of § 501 (c)(3) of the Internal Revenue Code of 1986, as amended
> (the "Code"), or the corresponding provision of any future United States tax
> code. Any reference in these Articles to the Code shall include the
> corresponding provisions of any further United States tax code."
> 
> Also from:
> 
> http://en.wikipedia.org/wiki/Public-benefit_nonprofit_corporation
> 
> "A public-benefit non-profit corporation  is a type of non-profit
> corporation chartered by a state government, and organized primarily or
> exclusively for social, educational, recreational or charitable purposes by
> like-minded citizens.  Public-benefit nonprofit corporations are distinct in
> the law from mutual-benefit nonprofit corporations in that they are
> organized for the general public benefit, rather than for the interest of
> its members."
> 
> I believe it was deliberately set up as public benefit rather than a member
> organization - to avoid the situation where the members become limited to
> say gTLD registries and registrars and hence it ends up operating primarily
> for the benefit of the domain name registration industry.    
> 
> Any move away from a public-benefit corporation to a membership corporation
> - would need to carefully consider how to ensure that the members are
> reflective of the broader Internet community and don't become limited to a
> few members as interest in "ICANN" drops over time.   I.e. a failure
> scenario of membership organisation is what happens to the membership base
> over time and how it can be protected from capture.    I have seen some
> membership based ccTLDs get into problems when their membership becomes
> dominated by domain name investors for example.
> 
> Regards,
> Bruce Tonkin
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