It is not about whether or not it is available for free, at cost, or otherwise, but whether or not the activity has the character of commercial product development. It's what the product is used for, not what price it's set at. A 501(c)(3) directly developing, or funding the development, of commercial software is not engaged in charitable, educational, or other exempt activities.

For reference: This is exactly what happened to the Yorba Foundation, and numerous others since then.[1]

[1] https://www.stradley.com/business-vantage-point-blog/irs-con...