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Allowing startups to begin as non-profits for tax benefits, only to 'flip' into profit-seeking ventures is a moral hazard, IMO. It risks damaging public trust i
by thereisnoself 3y ago
Allowing startups to begin as non-profits for tax benefits, only to 'flip' into profit-seeking ventures is a moral hazard, IMO. It risks damaging public trust in the non-profit sector as a whole. This lawsuit is important
- carlosjobim 3y agoI think the public already considers non-profit = scam.
- mrWiz 3y agoI don't think the public is quite that cynical, broadly. Certainly most people consider some non-profits to be scams, and some (few, I'd reckon) consider most to be scams. But I think most people have a positive association with non-profits as a whole.
- wkat4242 3y agoAbsolutely. Some nonprofits are scams but those are just the ones that have armies of collectors on the streets showing pictures of starving kids and asking for your bank details. But they stay obscure and out of the limelight (eg advertising) because being obscure is what makes them from being taken down. I think the big NGOs are no longer effective because they are run as the same corporations they fight and are influenced by the same perverse incentives. Like eg Greenpeace. But in general I think non profits are great and a lot more honorable than for profit orgs. I donate to many.
- abfan1127 3y agoif you're not profitable, there should be no tax advantage, right?
- mistrial9 3y agono that is not the test for nonprofit status
- hx8 3y agoOpenAI was a 501C3. This meant donors could give money to it and receive tax benefits. The advantage is in the unique way it can reduce the funders tax bill.
- somedude895 3y agoA donation is a no strings attached thing, so these donors basically funded a startup without getting any shares?
- deleted 3y ago[deleted]
- lolinder 3y agoOfficially, yes, but the whole situation with Altman's firing and rehiring showed that the donors can exert quite a bit of control if their interests are threatened.
- jprete 3y agoThat wasn't the donors' doing at all, though. If anything it was an illustration of the powerlessness of the donors and the non-profit structure without the force of law backing it up.
- hackerfoo 3y ago
- permo-w 3y agoI completely agree. AGI is an existential threat, but the real meat of this lawsuit is ensuring that you can't let founders have their cake and eat it like this. what's the point of a non-profit if they can simply pivot to making profit the second they have something of value? the answer is that there is none, besides dishonesty. it's quite sad that the American regulatory system is in such disrepair that we could even get to this point. that it's not the government pulling OpenAI up on this bare-faced deception, it's a morally-questionable billionaire
- renegade-otter 3y agoNuclear weapons are an existential threat - that's why there are layers of human due diligence. We don't just hook it up to automated systems. If we hook up an unpredictable, hard-to-debug technology to world-ending systems, it's not its fault, it's ours. The AGI part is Elon being Elon, generating a lot of words to sound like he knows what he is talking about. He spends a lot of time thinking about this stuff when he is not busy posting horny teenager jokes on Twitter?
- whimsicalism 3y ago[flagged]
- renegade-otter 3y agoYes, I closed that can of worms.
- nradov 3y agoThere is no reliable evidence that AGI is an existential threat, nor that it is even achievable within our lifetimes. Current OpenAI products are useful and technically impressive but no one has shown that they represent steps towards a true AGI.
- criddell 3y agoSure, but look at it from Musk's point of view. He sees the rise of proprietary AIs from Google and others and is worried about it being an existential threat. So he puts his money where his mouth is and contributes $50 million to found OpenAI - a non-profit with the mission of developing a free and open AI. Soon Altman comes along and says this stuff is too dangerous to be openly released and starts closing off public access to the work. It's clear now that the company is moving to be just another producer of proprietary AIs. This is likely going to come down to the terms around Musk's gift. He donated money for the company to create open technology. Does it matter if he's wrong about it being an existential threat? I think that's irrelevant to this suit other than to be perfectly clear about the reason for Musk giving money.
- eightnoteight 3y agoonce it converts into profit-seeking venture, it won't get the tax benefits one could argue that they did R&D as a non-profit and now converted to for-profit to avoid paying taxes, but until last year R&D already got tax benefits to even for-profit venture so there really is no tax-advantage of converting a non-profit to for-profit
- andrewflnr 3y agoBut it keeps the intangible benefits it accrued by being ostensibly non-profit, and that can easily be worth the money paid in taxes. Otherwise, why do you think OpenAI is doing it?
- eightnoteight 3y ago> it keeps the intangible benefits it accrued by being ostensibly non-profit but there would be no different to a for-profit entity right? i.e even for-profit entities get tax benefits if they convert their profits to intangibles this is my thinking. Open AI non-profit gets donations, uses those donations to make a profit, converts this profit to intangibles to avoid paying taxes, and pumps these intangibles into the for-profit entity. based on your hypothesis open ai avoided taxes but the same thing in a for-profit entity also avoids taxes, i.e for-profit entity uses investment to make a profit, converts this profit to intangibles to avoid paying taxes. so I'm trying to understand how Open AI found a loop hole where if it went via the for-profit then it wouldn't have gotten the tax advantages it got from non-profit route
- whimsicalism 3y agothis long period of OAI non-profit status when they were making no money and spending tons on capital expenditures would not be taxable anyways.
- andrewflnr 3y agoMaybe we're using different definitions of "intangible", but if you can "convert" them to/from profits they're not intangible in my book. I'm thinking donated effort, people they recruited who wouldn't have signed up if then company was for-profit, mainly goodwill related stuff.
- whimsicalism 3y agoThe public has no idea what non-profits are and a lot of things that people call 'profit seeking ventures' (ie. selling products) are done by many non-profits.
- jimbokun 3y agoI think the public is well aware that “non profit” is yet another scam that wealthy elites take advantage of, not available in the same way to the common citizen.
- whimsicalism 3y agoOr at least not available to the common citizen who does not have the $50 incorporation fee
- jprete 3y agoWhat matters isn't the money, but the knowledge of what to do with it. And that is not easily obtained by the common citizen at all.
- mrguyorama 3y agoIt's not even knowledge. I can't take advantage of most of the tax breaks rich people can because I am not in control of billions of dollars of physical and intellectual property to play shell games with. As a normal citizen with a normal career, I do not have any levers to play with to """optimize""" what the IRS wants me to pay. For some reason, we let people in control of billions of dollars worth of physical stuff and IP give them different names, and put them under different paper roofs so that they can give the IRS less money. It's such utter nonsense. Why should you have MORE ability to defer your tax liability by having MORE stuff? People make so many excuses about "but Jeff Bezos doesn't actually have billions in cash, he holds that much value in Amazon stock" as if that doesn't literally translate to controlling billions of dollars of Amazon property and IP and influence. Why does controlling more, and having more, directly translate to paying less?
- jimbokun 3y agoI live in Pittsburgh, and UPMC’s nonprofit status as they make billions in profits and pay their executives fortunes, is a running joke. With the hospitals and universities as the biggest employers and land owners here, a big chunk of the cities financial assets are exempt from contributing to the city budget.
- whimsicalism 3y agoIf they are non-profit, they do not make billions in profits. I suspect you mean revenue :) Exec compensation is another thing, but also not a concern I am super sympathetic to given that for profit companies of similar magnitude generally pay their execs way more they just are not required to report it.
- username332211 3y ago> If they are non-profit, they do not make billions in profits. I suspect you mean revenue :) Uhm, profit is a fact of accounting. Any increase in equity (or "net assets", or whatever other euphemism the accountant decides to use) on a balance sheet is profit. Revenue is something completely different.
- whimsicalism 3y agoChange in net asset is calculated the same as net profit, but is not the same in an accounting sense. Constitutive to profit is a return to private stakeholders, holding assets in reserve or re-investing in capital is not the same.
- username332211 3y agoWhat's in a name? That which we call a rose By any other name would smell as sweet
- whimsicalism 3y agoReinvesting in providing further care or lowering costs would smell as sweet as giving it to wealthy individuals? Should get your nose checked, sounds like you have covid or something.
- rqtwteye 3y agoPublic trust non-profit should rightfully get damaged. A lot of non profits like hospitals, churches or many “charities” are totally profit oriented. The only difference is that they pay the profits to their executives and their business friends instead of shareholders.
- krisboyz781 3y agoDidn't Visa start as a non proftit?
- Zigurd 3y agoDual license open source software, taking new versions of open source projects off open source licenses, and open source projects with related for-profit systems management software that makes it more likely enterprise customers will pay, are common practice. How would you distinguish what OpenAI has done?
- rchaud 3y agoYou are right, but regulatory sleight of hand is what passes for capitalism now. Remember Uber and Airbnb dodging regulations by calling themselves "ride-sharing" and "room-sharing" services? Amazon dodging sales taxes because it didn't have a physical retail location? Companies going public via SPAC to dodge the scrutiny of a standard IPO?
- standardUser 3y agoThis is not new. Companies have always done everything they can legally, and sometimes illegally, to maximize profit. If we ever expect otherwise shame on us.
- rchaud 3y agoIt might not be new, but the growth rate of such shenanigans across all aspects of our economy isn't exactly a positive indicator.
- standardUser 3y agoSame as it ever was imho. Better in some ways compared to previous eras when companies faced far, far fewer regulations.