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Mozilla gets lucky, settles IRS audit for $1.5M

After the U.S. government initiated a 2008 inquiry into the millions of dollars Mozilla made in its partnership with Google, the case is finally closed.

Mozilla Foundation Chairman Mitchell Baker

A nearly four-year tax audit of the Mozilla Foundation is finally over. And it looks like the foundation got off easy by handing over just $1.5 million to the U.S. government.

Mozilla Foundation Chair Mitchell Baker announced in a blog post today that the Internal Revenue Service (IRS) closed its audit and agreed to settle with the company.

"I'm happy to note that we've settled the issues raised and the IRS recently closed the audit," she wrote. "We entered into a settlement, under which the Mozilla Foundation paid the IRS US $1.5 million."

The IRS launched its audit of the Mozilla Foundation in 2008 after the foundation claimed that $66 million collected under its partnership with Google were royalty contributions and therefore shouldn't be taxed. Mozilla earned money from Google at the time by featuring the search engine prominently in two ways: a default start page with a Google search box, and a search bar in the upper right corner of the Firefox interface.

As a way to cushion itself just in case the IRS disagreed with Mozilla's tax exemption status, the foundation put $15 million to the side. However, it seems Mozilla got lucky and the IRS is now only asking for 10 percent of that $15 million.

"As a result of this settlement, $15 million in funds we had held in reserve pending the resolution of the audit are now available to support the Mozilla Foundation's mission to support innovation and opportunity on the web," Baker wrote in the blog post. "I believe this to be a very positive result."