Core Team Taxes (Part 1 of 2: August)

glennaustin

Member
Dash Core Team
Oct 10, 2017
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97
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This proposal is cross-posted at https://www.dashcentral.org/p/CORETEAMTAXES0818

Background

Dash Core Group, Inc. is a U.S. company incorporated in Delaware and headquartered in Arizona. As such, it needs to pay federal as well as state taxes. Over the long term the Dash Core Group tax rate should approach low levels relative to our funding (tax liability will be in the low single digits as a percentage of revenue).

Over the past few months Dash Core Group pursued a strategy of hedging our exposure to cryptocurrency and managing our tax liability by: 1) spending more Dash than we brought in by conscientiously avoiding funding from the Dash network unless absolutely necessary and 2) liquidating Dash for fiat to ensure sufficient balances for future obligations. We now have significant fiat buffers in the Business Development, Marketing, and Research budget lines, so that we can operate over the next 3 months without having to go back to the Dash network for funding. A side benefit of building this fiat buffer is that we avoided hundreds of thousands of dollars in taxable income.

What does this proposal fund?
During the fiscal year ending June 2018, we had income (Dash distributed to us from the superblock) and we incurred expenses (compensation, invoices, etc.). At the end of June 30, 2018 our balance sheet, at cost, was approximately $1.2 million. Our preliminary tax liability is estimated to be approximately $410,000 for fiscal year 2018 and approximately $110,000 for July through September 2018. The total amount of ~$520,000 is due on September 15th, 2018. We have decided that in order to minimize the disruption to the budget, we will split the tax related proposals unequally between the August 2nd and September 2nd budget. Taxes are not a discretionary expense. Specifically we are requesting $170,250 in the August 2nd budget cycle and $349,750 in the September 2nd budget cycle.

If funding is not approved, Dash Core Group will need to divert funding from another account to meet our tax liability.

Many in the community have asked why Dash Core Group is structured as a corporation versus a foundation or non-profit. When we initially evaluated what corporate structure Dash Core Group should be organized around, a non-profit seemed to make the most sense. However, in exchange for being tax exempt, those types of organizations have a lot of operational limitations. Our legal team advised us of 2 significant Dash-specific obstacles to this type of structure: 1) the source of all donations or contributions to the foundation would have to be disclosed (we would need to identify masternode owners) and 2) we couldn't pay developers to exclusively work only on the Dash network (we would be prohibited from promoting one specific solution). Both of those factors were show-stoppers and we decided to structure Dash as a corporation.

Although Dash Core Group is structured as a corporation, it is not expected to generate much taxable income (i.e., we only draw funding from the network required to fund liabilities and expenses). In the fiscal year ending June 30th, 2018, we had revenues of $7.5mm and our tax liability represents only 5.5% of revenues. Over the long term the Dash Core Group tax rate should approach even lower levels relative to our funding (tax liability will be in the low single digits as a percentage of revenue). This stems from the fact that all Dash in our accounts will eventually be an expense when those funds are spent on specific initiatives. However, in the short-term there is a necessity to hold a certain amount of Dash permanently in each account since we need a buffer to account for expense timing and currency fluctuation risk, as well as hold funds meant to pay future liabilities. It is this buffer that will drive our tax liability going forward.

If you have any questions, please direct them to @glennaustin in this Dash Forum post to ensure we are notified of your request.

Requested funding is as follows for the August 2nd budget cycle:
· 780.00 Dash for tax expenses ($170,250 @ $218.269 per Dash)
· 5.00 Dash proposal reimbursement
Total: 785.00 Dash

Note: Should any funding remain, we will apply it toward future tax expenses.

Manually vote YES on this proposal:
dash-cli gobject vote-many d44e10f7aeb016d04ff630dbe20e9dcf28edcecffbb012bb59b8b0343890f7d1 funding yes
OR from the qt console:
gobject vote-many d44e10f7aeb016d04ff630dbe20e9dcf28edcecffbb012bb59b8b0343890f7d1 funding yes

Manually vote NO on this proposal:
dash-cli gobject vote-many d44e10f7aeb016d04ff630dbe20e9dcf28edcecffbb012bb59b8b0343890f7d1 funding no
OR from the qt console:
gobject vote-many d44e10f7aeb016d04ff630dbe20e9dcf28edcecffbb012bb59b8b0343890f7d1 funding no
 
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solarguy

Active Member
Mar 15, 2017
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Obvious yes vote.

We have to pay our bills.

Thanks for the detailed explanation.