The artificial intelligence maker OpenAI may face a costly and inconvenient reckoning with its nonprofit origins even as its valuation recently exploded to $157 billion. Nonprofit tax experts have been closely watching OpenAI, the maker of ChatGPT, since last November when its board ousted and rehired CEO Sam Altman.
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However, they also see OpenAI as ripe for scrutiny from regulators, including the Internal Revenue Service and state attorneys general in Delaware, where its incorporated, and in California, where it operates. Tax-exempt nonprofits sometimes decide to change their status. That requires what the IRS calls a conversion.
In OpenAI’s case, there are many questions: What assets belong to its nonprofit? What is the value of those assets? Do they include intellectual property, patents, commercial products and licenses? Also, what is the value of giving up control of the for-profit subsidiaries? “It would be a complex, involved process with numerous different legal and regulatory considerations to work through,” he said. “But it’s not impossible.”To be granted tax-exempt status, OpenAI had to apply to the IRS and explain its charitable purpose.
“OpenAI was set up with a big emphasis on safety. Its primary objective was to develop artificial general intelligence and ensure that it was safe,” Hinton said, adding that “over time, it turned out that Sam Altman was much less concerned with safety than with profits. And I think that’s unfortunate.”Ultimately, this question returns to the board of OpenAI’s nonprofit, and the extent to which it is acting to further the organization’s charitable mission.
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