Proposal “CORETEAMTAXES0918“ (Active)Back

Title:Core Team Taxes (Part 2 of 3: September)
Owner:glennaustin
One-time payment: 1013 DASH (153366 USD)
Completed payments: no payments occurred yet (1 month remaining)
Payment start/end: 2018-08-17 / 2018-09-16 (added on 2018-08-02)
Votes: 733 Yes / 146 No / 12 Abstain
Will be funded: Yes
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Proposal description

Dash Core Group September 1st Funding Proposals
DCG is submitting 3 funding proposals for the September 1st budget cycle:
1) DCG Compensation: $600,000 (here)
2) DCG Taxes: $210,000 (current proposal)
3) DCG Legal: $125,000 (here)

This is $140,000 less than we initially communicated (https://www.dash.org/forum/threads/dcg-budget-planning-update-q3-2018-cross-posted-to-allow-comments.39820/) due to two factors:
1) A recent IRS rule change.  This rule change allows for the Q1 payment for fiscal year ending 6/30/2019 to be paid on October 15th, 2018.  As a result, the Q1 tax payment will be requested in the budget cycle paying out on October 2nd to lessen the impact on the current budget cycle.  Thank you Dash community for encouraging us to further explore how we can delay some of our tax related payments to minimize impact on the Dash network’s monthly budgets.
2) The estimated tax liability has been reduced by $50,000 as finance and the tax accounting firm review our methodology to calculate the tax payment and identify mechanisms to reduce our tax liabilities. We will continue evaluating additional measures that may reduce taxes further.

This Proposal

This proposal is cross-posted from https://www.dash.org/forum/threads/core-team-taxes-part-2-of-3-september.39898/#post-194035

Background

This is part 2 of 3 of our tax funding proposal for fiscal year 2018.  The total amount requested for the second part of the proposal is $210,000, compared to the $350,000 we expected to post that was referenced in last month’s taxes proposal. https://www.dash.org/forum/threads/core-team-taxes-part-1-of-2-august.39422/

As covered in part one of our tax proposal, 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 funding).

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. Another benefit of building this fiat buffer is that we avoided hundreds of thousands of dollars in taxable income by realizing tax losses.
What does this proposal fund?
During the fiscal year ending June 2018, we had income (Dash distributed to us from the superblocks) 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 ~$380,000 for fiscal year 2018 and approximately ~$90,000 for July through September 2018.  The $380,000 is due on September 15th, 2018 and the $90,000 is due October 15, 2018.  We previously decided that in order to minimize the disruption to the budget, we would split the tax related proposals unequally between the August 2nd and September 1st budget.  We are now further splitting out the September 1st tax proposal into 2 proposals.  Specifically we requested and were funded ~$170,000 in the August 2nd budget cycle.  For the September 1st budget cycle we are requesting $210,000.  Finally, for the October 2nd budget cycle we will request a final $90,000.

Taxes are not a discretionary expense. 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.  For more detail regarding this topic and the overall Dash Core Group legal structure please refer to the illuminating post Ryan Taylor provided on 7/31/2018 at https://www.dash.org/forum/threads/dash-core-group-legal-structure-details.39848/#post-193885
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 were funded $7.5mm and our tax liability represents only 5.5% of that amount.  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 the growth of this buffer that will drive our tax liability going forward.

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

Requested funding is as follows for the September 1st budget cycle:
· 1,008.00 Dash for tax expenses ($210,000 @ $208.325 per Dash)
· 5.00 Dash proposal reimbursement
Total: 1,013.00 Dash

Note: Should any funding remain, we will apply it toward future legal or tax expenses.  We have decided to commingle our legal and tax funds for increased flexibility in spending.  If there is either a shortfall or excess in funding due to fluctuation in the price of Dash related to taxes we will respectively draw upon or fund our legal budget.

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Discussion: Should we fund this proposal?

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-1 point,3 days ago
BTW, the IRS doesn't take tax payments in Dash. Sell-off mandatory in a low-liquidity market. Be prepared for another price dip.
Reply
-1 point,3 days ago
The first tranche of payment was converted immediately to fiat upon the superblock payout. We plan to do the same with this next tranche.
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1 point,6 days ago
funny how this has turned into a typical gov-coin...
Mass sell-offs anticipated regardless of how mno's vote on this one dash sell off proposal...
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0 points,6 days ago
I quickly skimmed over the forum posts, couldn't find an explanation:

> "Dash Core Group, Inc. is a U.S. company incorporated in Delaware and headquartered in Arizona"

Why?

I'm sure this has been addressed somewhere, but I'm not on Dash media 24/7. Can someone please point me to an explanation why DCG chose the US, one of the most restrictive tax regimes in the world, to incorporate and create these sort of obligations in the first place?

Why do we, as a global community, pay for Trump's government, when we could just as easily (in my layman's opinion) be based on the Caymans, BVI, Malta, Seychelles or some other such place for legal purposes and get off scot-free?
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1 point,5 days ago
Remember that Dash Ventures is based in the Cayman Islands for a reason...
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1 point,5 days ago
I don't remember that, no. Like I said, I'm not on Dash media 24/7. Where can I learn more about this? What is Dash Ventures?
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0 points,4 days ago
Ryan's Q&A on the Dash Force News 3 Amigos Podcast a few weeks back has probably been the most significant discussion of the project. It should be the first serious question covered in the podcast.
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2 points,5 days ago
I've no first-hand knowledge, only assumptions, which is that registering in a "tax haven" would make a product which is already a politically-risky operation and sell -- that is, a new type of money, legal tender be damned! -- even harder to operate and sell.
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1 point,5 days ago
Hmm, could be, but I'm not sure the people in the markets we're gaining the first foothold in - developing and crisis countries - really care that much about paying taxes to uncle Sam, of all places.

Even America's most beloved companies seek tax shelter on tiny islands: https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.html ... yet their business doesn't suffer. Just like Apple, I'd consider it an obligation to share/coin holders to do everything legally possible to minimize tax cost.

Voluntarily funding the US government, just to keep up appearances, if that's what the reason is, might even backfire with US reputation on the global stage being obliterated by all the Trump madness and most of Dash's business coming from outside the US.

Dash is not an American thing. It's a global network. I say if there is a foundation supporting it that needs to be incorporated somewhere, choose the cheapest place to do so globally.
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2 points,6 days ago
I asked this exact same thing before, and didn't get any reply. Between this, and Core not answering basic questions asked by MNOs, I will keep voting no on their proposals.
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0 points,4 days ago
Because Evan started up the core team in arizona? Because it takes a lot of work to wire money in from offshore accounts. Because the team didn't have extra time or resources to spend with all the troubles of offshore activities. Because its best to have a US corporation to work with other US companies. Because either way you need a US corporation even if you have a tax haven structure.
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1 point,3 days ago
None of that makes sense. Evan started it in Arizona. So what? That was years ago. Plenty of time to set up something better.

> Because it takes a lot of work to wire money in from offshore accounts.

BS. You can have a company registered in an offshore location and a multi-currency trade bank account for that company in a well-connected finance hub like Singapore or Hong Kong. Sending money from there anywhere in the world* is a piece of cake. Couple clicks in an online banking interface. Plus, a good number of Dash Core members live in Hong Kong anyway.

And even if an international wire transfer costs a bit more in fees than an ACH transfer within the US, it's not $210,000 per QUARTER more!

> Because the team didn't have extra time or resources to spend with all the troubles of offshore activities

BS again. What "all the troubles"? Have a look at the Panama Papers. You can set up an offshore company in less than a day. A week if you count in your research. There are service companies and consultancies specialized in making this super simple. A couple hundred bucks in fees and you're done. Beats paying $210,000 per QUARTER! "Didn't have the resources"? Penny wise and pound foolish!

> Because its best to have a US corporation to work with other US companies.

What other US companies? What I see is adoption picking up in Venezuela, Africa, even Europe has more Dash business than the US.

And if you mean companies that serve the Core team, well, believe it or not, but there are excellent companies for all kinds of purposes outside the US. Take Ogilvy from that rebranding effort. They have an office in every corner of the world. Why do we need US companies?

> Because either way you need a US corporation even if you have a tax haven structure.

That's the biggest BS of them all. Sounds like a typical self-absorbed American. You NEED a US company as much as you NEED a UK company. Or a Japanese company. Or a [fill in other country] company. The world does not revolve around the United States alone. Definitely not the Dash world anyway. Dash is global. Decentralized. Let's take advantage of it!



*no, not to North Korea
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3 points,8 days ago
> If funding is not approved, Dash Core Group will need to divert funding from another account to meet our tax liability.

I imagine this diversion will come from the department that Dash Core has always considered the least important -- marketing and PR.

Which actually means that not passing this proposal is a good thing. Everybody wins -- the Core Group still gets to pay their taxes, AND funds will be diverted away from their lowest-performing department.
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1 point,6 days ago
That might be. But it needs to be clearly communicated. Because now you and I are just guessing.
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2 points,8 days ago
I think a significant number of MNOs supported other past Core proposals partly on the understanding that taxes were being paid as part of that funding. It is possible that some of that support may have been misplaced because the net ask from CDG is larger when this proposal is included. The total CDG burden to the Treasury has to be sustainable and adaptable to changing market conditions. Obviously Core has to pay its taxes, but creating a buffer against market volatility and minimizing tax liability are opposite and contradictory goals, so which one is the priority?
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-2 points,7 days ago
If I were an outside institutional investor I would be extremely turned off by Dash if the network itself voted to not meet its core development team tax liabilities. That's not something a professional investment firm should consider as a realistic investment. What core is doing has never been done before, there is bound to be bumps in the road. Let's just get past this and focus on the future.
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4 points,6 days ago
The network can't vote on whether to pay taxes. Dash Core Group will pay taxes regardless. The proposal is just poorly worded and doesn't make it clear what it is that won't happen if this proposal doesn't pass.
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1 point,8 days ago
> If funding is not approved, Dash Core Group will need to divert funding from another account to meet our tax liability.

Please clarify what that means. What will happen or not happen if the proposal does not pass? Taxes will be paid regardless but what will change?
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1 point,12 days ago
You have my support
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1 point,12 days ago
voting YES.
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1 point,16 days ago
Thank you for getting the core proposals in at the very beginning of the cycle.
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4 points,16 days ago
Every month the community and core needs to re-evaluate the impact of using most of the budget when there are still options available to not. I think the fiat in the marketing budget buffer should be used to reduce this proposal size or fund marketing related projects that pass but were not funded. Core consistently operates on old "plans" and obligations from 6 months ago that the community would support changes to the agreements given the current circumstances. The community can survive a restrictive month here and there but going 2 or 3 months in a row is damaging.
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0 points,16 days ago
thank you for splitting
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3 points,17 days ago
I suggest you work out a payment plan with the TaxMan in order to make small but acceptable monthly payments. Then, when the price rises as a result of the value added that CORE provides, the tax remaining due can be pain using far fewer Dash.
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