Overview & Disclaimer:
I’ve put together the following summary of PA’s current tax/accounting situation and proposed solutions based on conversations I’ve had with some legal and tax folks. Note that this is all shared to help educate this group, but is not intended to be legal or financial advice. We can collectively consider retaining accountants, lawyers, or tax advisors to get more precise advice for PA, and should also consult our own lawyers and financial advisors for our personal tax issues.
Additionally, much of this is more relevant to myself, @losingmyego, @valcoholics, @junghwan, @DBlodorn, @salief, @Javier-Szyfer — but as the whole DAO will need to be on board with the transition into its next phase, it feels important to have all of this information published + discussed publicly
Summary of Situation
PA should take the following steps to handle tax compliance for 2022 ops + set up pathway to transitioning into an UNA during 2023
- 7 person PA founding team should consider drafting an internal agreement acknowledging that their ownership of the veto power means the current PA structure is a general partnership that they control. This agreement should also say that the plan is to convert it into an UNA as soon as possible
- Each member of 7 person founding team needs to pay income tax on a 1/7 portion of the treasury value at the end of 2022 (which amounts to all auction revenue earned Dec 2 - Dec 31, since the partnership didn’t have expenses in 2022)
- Income reported as “other income” for US + Canada members. Argentina may be different
- Partnership also should likely file a 1065 to report the partnership’s revenue/losses. Template
Each member of 7 person founding team who received a founders allocation needs to report the revenue from that allocation – and can use the eth/usd price of the previous day’s auction as a proxy for that value (eth/usd price at time of allocation received)
- Canada + Argentina may have stricter rules for reporting this
A non zora member should open up a new checking/credit account that can be used to transition ops expenses to during the process of setting up an official business account for PA
- Currently Zora is covering ops costs as a service provider to the DAO. We’ll want to move away from this as soon as possible, so will need to be able to pay the expenses ourselves directly.
For clarity, salaries paid to Max, Joey, and Dain are not DAO expenses - they will continue to get paid by Zora separately for the core Zora work they are doing for the time being.
PA should pass a proposal authorizing Zora as a service provider for the DAO for current operational expenses and provide compensation (this can be a discounted rate)
PA should also set a date that we want to transition of ZORA funding for operational expenses (aka payments coming via Zora brex card for things like discourse, figma, etc)
- Start working on setting up UNA business bank account (longer term thing, Builder hasn’t even gotten this set up yet)
- Start charting the UNA
- Once this date gets hit, payment for ops transfers over to the bank account someone from 7 person founding team has set up, since in the period after we transfer away from zora funding + before the PA UNA is set up, it is all still a general partnership so payment can come from anyone on founding team
Proposals to submit once the above is prepped
Submit proposal to retroactively acknoweldge ZORA as a service provider up till this point + reimburse them for expenses paid up to the agreed upon transition date
Submit proposal to charter UNA
Submit follow up proposal to authorize agents (preferably non zora employees) to be able to do things such as get the UNA a tax ID, elect corporate taxation, set up bank accounts, and take on the responsibility of owning and paying for our operational service providers like figma etc.