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TFA: > OpenAI had spent months making the case that it was the economic heart of the California economy—and would be willing to leave if Bonta blocked its plan

TFA: > OpenAI had spent months making the case that it was the economic heart of the California economy—and would be willing to leave if Bonta blocked its plan to convert to a simpler corporate structure. https://x.com/sama/status/1983223056668746218 https://x.com/sama/status/1983223056668746218: > California is my home, and I love it here, and when I talked to Attorney General Bonta two weeks ago I made clear that we were not going to do what those other companies do and threaten to leave if sued. Hmmm...

swyx 1y ago
> if Bonta blocked its plan to convert to a simpler corporate structure. i'm a bit out of the loop but honestly why does California have a say? surely the investor base and Microsoft was a far harder negotiation than this one. this one smells of govt overreach.
- hrimfaxi 1y ago
  Corporations exist at the pleasure of government do they not? They are not some naturally-existing thing.
  - atonse 1y ago
    I would think that sort of framing implies that the government gives them permission to exist. Rather than, the natural state is that they exist unless they do something bad enough to be shut down. Unless you mean, they need the government's "permission" to even file to become a corporation... But even in that case, you aren't asking for permission, you're doing the old school equivalent of signing up for a domain, you're submitting a filing and reserving a spot for that name/ID.
    - ElevenLathe 1y ago
      It's more than that. When you file to incorporate, there is a birth. A new person is created, one that can potentially never die. Yes, it's routine, but it wasn't always, and it doesn't need to be forever. The ability to create a new, fake, person in order to shield yourself and your business partners from liability is a not a right. It is a deliberate policy that some sovereign jurisdictions allow their citizens.
    - palmotea 1y ago
      > I would think that sort of framing implies that the government gives them permission to exist. > Rather than, the natural state is that they exist unless they do something bad enough to be shut down. JFC, come on. Corporations are legal entities and have no existence separate from the law. If they even have a natural state, that natural state is non-existence.
      - travisjungroth 1y ago
        > All corporations are devoid of inherent nature. > There is no inherent nature whatsoever. > What is inherently existing is empty. > What is empty is inherently existing. Nāgārjuna vs Delaware
      - atonse 1y ago
        Yeah I think we're splitting hairs and actually aren't in any sort of disagreement here. I 100% agree that you have to be registered on paper with a government entity to get all the legal protections, insurance, etc etc etc. I've been a business owner for nearly 20 years. Like, a real business, with real paperwork and insurance and all that. I'm thinking of all the unofficial mom and pops that transact and do business every day without having a proper legal entity. so it's more of a "does that count as a business even if they didn't file articles of incorporation?" of course it does, as far as its customers are concerned. Think of the idea of "this guy has a lawn care business, I pay him every week to mow my lawn for 10 years", as far as his customers are concerned, he didn't need to get permission from the government to start doing that. And this sort of thing happens all the time. I am NOT arguing whether a business where you filed articles is a legal entity, etc. There's no question that they are. Hope that clarifies my point.
        int_19h 1y ago
        I mean, if Sam Altman wants to run OpenAI as individual proprietorship, without the limited liability that corporate shield gives, he's totally welcome to do so, and that would require far less paperwork.
      - JumpCrisscross 1y ago
  - JumpCrisscross 1y ago
    > Corporations exist at the pleasure of government do they not? No. “At the pleasure of” means total discretion. The government can’t just stop letting businesses incorporate because it doesn’t like how a county voted.
    - zeroonetwothree 1y ago
      There is no constitutional right to incorporate. Theoretically states could stop it at any time. Although they would still have to honor corporations formed in other states so it’s of limited effect.
      - JumpCrisscross 1y ago
        > There is no constitutional right to incorporate The Constitution directly grants very few individual rights. It’s mostly a document about what the government can’t do. > Theoretically states could stop it at any time Sure. That’s not “at the pleasure of.” Driver’s licenses are not issued “at the pleasure of” a state. Neither are marriage certificates. They’re issued as a matter of process that binds both the issuer and recipient to a predictable set of rules.
      - terminalshort 1y ago
        But there is a constitutional right to equal protection under the law. So while a state can say "everybody can incorporate" or "nobody can incorporate" without scrutiny, there are some pretty hash restrictions on rules that say some people can incorporate and others can't, especially if those restrictions look like they are written to be retaliatory against someone who pissed off the government.
    - hrimfaxi 1y ago
      Why can't the government do that? Is it because the government created laws that limited its total discretion? That is besides my point. The people allow for corporations to exist is what I was getting at, and in the US businesses incorporate at the state level. So asking why California has a say in the structure of a company incorporated in it seemed odd to me on its face.
- danielmarkbruce 1y ago
  The entity in question operates in california and is thus subject to california law. California has laws around charitable entities. One might reasonably claim it's overreach, but in response OpenAI could just leave the state. Which is what they threatened.
  - wbl 1y ago
    Not when the AG sues the board and Sam for all the violations that happened around his ouster. The board isn't independent.
    - danielmarkbruce 1y ago
      They absolutely can leave the state. Board independence is largely a silly idea, people aren't even on the same page as to what the board is supposed to be independent of, and in this case it's not even clear which board you mean - the current one? The previous one? In what way are they less independent than any other board?
      - JumpCrisscross 1y ago
        > people aren't even on the same page as to what the board is supposed to be independent of In the U.S. they absolutely are. The SEC defines independent directors [1]. If the majority of a (Delaware corporation's) Board isn't independent, it opens up the company and even individual Board members to heightened scrutiny by the courts [2]. [1] https://www.skadden.com/-/media/files/publications/2022/02/the-informed-board/what-exactly-is-an-independent-director-hint-its-more-complicated-than-you-think.pdf https://www.skadden.com/-/media/files/publications/2022/02/t... [2] https://www.faegredrinker.com/en/insights/publications/2022/2/the-corporate-guide-keeping-board-actions-conflictfree https://www.faegredrinker.com/en/insights/publications/2022/...
        danielmarkbruce 1y ago
        You link to a skadden doc, not an SEC rule, and in that doc the first words are: "Independence is neither a fixed condition nor a universal status for all purposes. " and goes on to talk about how complicated it is to even define and how it depends on who is defining it. Your document makes my exact point, not yours. You are out of your depth.
- bix6 1y ago
  Because the company was formed as a non-profit and now wants to cash out? He has to protect the integrity of non-profits as a distinct entity type.
- mandevil 1y ago
  Because of the unusual history of OpenAI, the Government had far more of a say than normal for a company. Remember, OpenAI was originally created as a California non-profit (a charity doing work to create a better AI future). As a charity, it doesn't have to pay the same taxes as it would as a for-profit company, but in exchange it has more rules it needs to follow. And then it released ChatGPT, it exploded in value, it needed to raise truly absurd amounts of capital in order to get to the next model, and thus the lawyers had to spend a good long time extracting the company from the charity. For very good reasons, the laws make it hard to go from a charity to a for-profit company- because if you could easily transition between the two you could game tax laws with ease. In the end, being allowed to do this required negotiations, and promising to keep OpenAI in California- where they would be subject to other California regulations and taxes in the future. If they had a "normal" corporate history- had been founded as a Delaware S Corp from the beginning- then this wouldn't be a thing and they would be free to move as they like(1). But, being a weird charity probably helped them attract talent in the critical beginning phases (before it became a money race with Zuck), and it has consequences now. 1: Just as an example, Palantir moved their corporate headquarters to Denver from Palo Alto years ago without a peep from the CA government.
  - JumpCrisscross 1y ago
    > a California non-profit (a charity doing work to create a better AI future) Note: non-profit != charity. (All charities are non-profits. Not all non-profits are charities. PACs and non-profit hospitals, for example, are not charities, though the latter can have charitable arms.)
    - mandevil 1y ago
      While that is true in the general case, OpenAI was founded as a 501(c)3 to whom all donations were tax-deductible, which is why I used non-profit and charity interchangeably in describing it in particular. There was a for-profit subsidiary spun up in 2019, four years after the original non-profit was created. But it was still owned and operated by the larger non-profit charity organization. See, for example, Charity Navigator's page on OpenAI: https://www.charitynavigator.org/ein/810861541 https://www.charitynavigator.org/ein/810861541
- conradev 1y ago
  But who oversees how charities use their assets and ensures that they are used for public benefit? That job lies with the Charitable Trusts Section of California’s Office of the Attorney General, which is part of the state’s Department of Justice. Charged with both regulatory and law enforcement responsibilities, the section has a big job. https://www.svcf.org/about/news-media/blog/california-attorney-generals-office-protecting-the-publics-assets https://www.svcf.org/about/news-media/blog/california-attorn...
- array_key_first 1y ago
  Yes, blocking a NON-PROFIT from magically IPO-ing as a for profit company and therefore skirting years of taxes is overreach. Guys, the only state morally bankrupt enough to just allow that is Texas. Why do you think these tech bozos love Texas? It's basically cyberpunk over here. Our government actively hates us. We struck down paid water breaks in Texas. I once worked a job with no breaks at all. 10 hour days, no lunch. Yes, that's legal here.
  - ergocoder 1y ago
    The point about profit is a bit moot because OpenAI would have never paid any tax if it were for profit, as in they haven't made any profit.
  - Sohcahtoa82 1y ago
    > I once worked a job with no breaks at all. 10 hour days, no lunch. Yes, that's legal here. For the life of me, I will never understand why workers vote against even the most minimal break requirements. Is it simply that the majority of voters already work a job that gives them breaks and so don't see the need to make it a legal requirement? That seems very much like a "pull the ladder up behind you" mentality.
isx726552 1y ago
This feels like a narrative being pushed. Tech oligarchs these days are flexing by showing off how much they are able to bully government, and Altman wants to get in on the game by spinning things this way. I’m not convinced they really bent the rules for OpenAI any more than usual given they only employ a few hundred people.
- colinmorelli 1y ago
  OpenAI has over 5,000 employees. In addition to their headcount, they are now the highest valued private company in the world. They're going to have some leverage.
- dmix 1y ago
  I doubt OpenAI has to try very hard to convince state politicians, especially to the point of bullying. It's usually the complete opposite where they throw money at you to stay. Imagine if California managed to scare away the hottest company in the world and all the tax revenue it brings...
burningChrome 1y ago
Musk said the same thing about CA too. All CEO's make decisions based on what is best for them and their companies. There is no loyalty in business. Edward Niedermeyer, author of “Ludicrous: The Unvarnished Story of Tesla Motors,” said Musk was happy to benefit from California’s largesse when it suited him and to move on when he saw fit. “I think Musk has made the calculation that he’s gotten all the benefits he’s likely to get out of the state and he’s moving on to the next one,” Niedermeyer said. “The state of California clearly thought that all its work bought loyalty [from Musk] but, instead, I think it bought a sense of entitlement.” Elon Musk’s messy divorce with California leaves ugly grievances all around: https://www.latimes.com/california/story/2024-07-23/elon-musk-space-x-california https://www.latimes.com/california/story/2024-07-23/elon-mus...
thaumaturgy 1y ago
OpenAI announced $10 billion ARR in June of this year (https://www.cnbc.com/2025/06/09/openai-hits-10-billion-in-annualized-revenue-fueled-by-chatgpt-growth.html https://www.cnbc.com/2025/06/09/openai-hits-10-billion-in-an...). Agriculture in California hit $61 billion in annual receipts in 2024 (https://www.cdfa.ca.gov/statistics/ https://www.cdfa.ca.gov/statistics/). So, not that OpenAI isn't big, but, "the heart of the California economy"? OpenAI needs to IPO, because if they don't get in on the current meme stock economy, they're going to collapse.

swyx 1y ago

> if Bonta blocked its plan to convert to a simpler corporate structure. i'm a bit out of the loop but honestly why does California have a say? surely the investor base and Microsoft was a far harder negotiation than this one. this one smells of govt overreach.

hrimfaxi 1y ago
Corporations exist at the pleasure of government do they not? They are not some naturally-existing thing.
- atonse 1y ago
  I would think that sort of framing implies that the government gives them permission to exist. Rather than, the natural state is that they exist unless they do something bad enough to be shut down. Unless you mean, they need the government's "permission" to even file to become a corporation... But even in that case, you aren't asking for permission, you're doing the old school equivalent of signing up for a domain, you're submitting a filing and reserving a spot for that name/ID.
  - ElevenLathe 1y ago
    It's more than that. When you file to incorporate, there is a birth. A new person is created, one that can potentially never die. Yes, it's routine, but it wasn't always, and it doesn't need to be forever. The ability to create a new, fake, person in order to shield yourself and your business partners from liability is a not a right. It is a deliberate policy that some sovereign jurisdictions allow their citizens.
  - palmotea 1y ago
    > I would think that sort of framing implies that the government gives them permission to exist. > Rather than, the natural state is that they exist unless they do something bad enough to be shut down. JFC, come on. Corporations are legal entities and have no existence separate from the law. If they even have a natural state, that natural state is non-existence.
    - travisjungroth 1y ago
      > All corporations are devoid of inherent nature. > There is no inherent nature whatsoever. > What is inherently existing is empty. > What is empty is inherently existing. Nāgārjuna vs Delaware
    - atonse 1y ago
      Yeah I think we're splitting hairs and actually aren't in any sort of disagreement here. I 100% agree that you have to be registered on paper with a government entity to get all the legal protections, insurance, etc etc etc. I've been a business owner for nearly 20 years. Like, a real business, with real paperwork and insurance and all that. I'm thinking of all the unofficial mom and pops that transact and do business every day without having a proper legal entity. so it's more of a "does that count as a business even if they didn't file articles of incorporation?" of course it does, as far as its customers are concerned. Think of the idea of "this guy has a lawn care business, I pay him every week to mow my lawn for 10 years", as far as his customers are concerned, he didn't need to get permission from the government to start doing that. And this sort of thing happens all the time. I am NOT arguing whether a business where you filed articles is a legal entity, etc. There's no question that they are. Hope that clarifies my point.
      - int_19h 1y ago
        I mean, if Sam Altman wants to run OpenAI as individual proprietorship, without the limited liability that corporate shield gives, he's totally welcome to do so, and that would require far less paperwork.
    - JumpCrisscross 1y ago
- JumpCrisscross 1y ago
  > Corporations exist at the pleasure of government do they not? No. “At the pleasure of” means total discretion. The government can’t just stop letting businesses incorporate because it doesn’t like how a county voted.
  - zeroonetwothree 1y ago
    There is no constitutional right to incorporate. Theoretically states could stop it at any time. Although they would still have to honor corporations formed in other states so it’s of limited effect.
    - JumpCrisscross 1y ago
      > There is no constitutional right to incorporate The Constitution directly grants very few individual rights. It’s mostly a document about what the government can’t do. > Theoretically states could stop it at any time Sure. That’s not “at the pleasure of.” Driver’s licenses are not issued “at the pleasure of” a state. Neither are marriage certificates. They’re issued as a matter of process that binds both the issuer and recipient to a predictable set of rules.
    - terminalshort 1y ago
      But there is a constitutional right to equal protection under the law. So while a state can say "everybody can incorporate" or "nobody can incorporate" without scrutiny, there are some pretty hash restrictions on rules that say some people can incorporate and others can't, especially if those restrictions look like they are written to be retaliatory against someone who pissed off the government.
  - hrimfaxi 1y ago
    Why can't the government do that? Is it because the government created laws that limited its total discretion? That is besides my point. The people allow for corporations to exist is what I was getting at, and in the US businesses incorporate at the state level. So asking why California has a say in the structure of a company incorporated in it seemed odd to me on its face.
danielmarkbruce 1y ago
The entity in question operates in california and is thus subject to california law. California has laws around charitable entities. One might reasonably claim it's overreach, but in response OpenAI could just leave the state. Which is what they threatened.
- wbl 1y ago
  Not when the AG sues the board and Sam for all the violations that happened around his ouster. The board isn't independent.
  - danielmarkbruce 1y ago
    They absolutely can leave the state. Board independence is largely a silly idea, people aren't even on the same page as to what the board is supposed to be independent of, and in this case it's not even clear which board you mean - the current one? The previous one? In what way are they less independent than any other board?
    - JumpCrisscross 1y ago
      > people aren't even on the same page as to what the board is supposed to be independent of In the U.S. they absolutely are. The SEC defines independent directors [1]. If the majority of a (Delaware corporation's) Board isn't independent, it opens up the company and even individual Board members to heightened scrutiny by the courts [2]. [1] https://www.skadden.com/-/media/files/publications/2022/02/the-informed-board/what-exactly-is-an-independent-director-hint-its-more-complicated-than-you-think.pdf https://www.skadden.com/-/media/files/publications/2022/02/t... [2] https://www.faegredrinker.com/en/insights/publications/2022/2/the-corporate-guide-keeping-board-actions-conflictfree https://www.faegredrinker.com/en/insights/publications/2022/...
      - danielmarkbruce 1y ago
        You link to a skadden doc, not an SEC rule, and in that doc the first words are: "Independence is neither a fixed condition nor a universal status for all purposes. " and goes on to talk about how complicated it is to even define and how it depends on who is defining it. Your document makes my exact point, not yours. You are out of your depth.
bix6 1y ago
Because the company was formed as a non-profit and now wants to cash out? He has to protect the integrity of non-profits as a distinct entity type.
mandevil 1y ago
Because of the unusual history of OpenAI, the Government had far more of a say than normal for a company. Remember, OpenAI was originally created as a California non-profit (a charity doing work to create a better AI future). As a charity, it doesn't have to pay the same taxes as it would as a for-profit company, but in exchange it has more rules it needs to follow. And then it released ChatGPT, it exploded in value, it needed to raise truly absurd amounts of capital in order to get to the next model, and thus the lawyers had to spend a good long time extracting the company from the charity. For very good reasons, the laws make it hard to go from a charity to a for-profit company- because if you could easily transition between the two you could game tax laws with ease. In the end, being allowed to do this required negotiations, and promising to keep OpenAI in California- where they would be subject to other California regulations and taxes in the future. If they had a "normal" corporate history- had been founded as a Delaware S Corp from the beginning- then this wouldn't be a thing and they would be free to move as they like(1). But, being a weird charity probably helped them attract talent in the critical beginning phases (before it became a money race with Zuck), and it has consequences now. 1: Just as an example, Palantir moved their corporate headquarters to Denver from Palo Alto years ago without a peep from the CA government.
- JumpCrisscross 1y ago
  > a California non-profit (a charity doing work to create a better AI future) Note: non-profit != charity. (All charities are non-profits. Not all non-profits are charities. PACs and non-profit hospitals, for example, are not charities, though the latter can have charitable arms.)
  - mandevil 1y ago
    While that is true in the general case, OpenAI was founded as a 501(c)3 to whom all donations were tax-deductible, which is why I used non-profit and charity interchangeably in describing it in particular. There was a for-profit subsidiary spun up in 2019, four years after the original non-profit was created. But it was still owned and operated by the larger non-profit charity organization. See, for example, Charity Navigator's page on OpenAI: https://www.charitynavigator.org/ein/810861541 https://www.charitynavigator.org/ein/810861541
conradev 1y ago
But who oversees how charities use their assets and ensures that they are used for public benefit? That job lies with the Charitable Trusts Section of California’s Office of the Attorney General, which is part of the state’s Department of Justice. Charged with both regulatory and law enforcement responsibilities, the section has a big job. https://www.svcf.org/about/news-media/blog/california-attorney-generals-office-protecting-the-publics-assets https://www.svcf.org/about/news-media/blog/california-attorn...
array_key_first 1y ago
Yes, blocking a NON-PROFIT from magically IPO-ing as a for profit company and therefore skirting years of taxes is overreach. Guys, the only state morally bankrupt enough to just allow that is Texas. Why do you think these tech bozos love Texas? It's basically cyberpunk over here. Our government actively hates us. We struck down paid water breaks in Texas. I once worked a job with no breaks at all. 10 hour days, no lunch. Yes, that's legal here.
- ergocoder 1y ago
  The point about profit is a bit moot because OpenAI would have never paid any tax if it were for profit, as in they haven't made any profit.
- Sohcahtoa82 1y ago
  > I once worked a job with no breaks at all. 10 hour days, no lunch. Yes, that's legal here. For the life of me, I will never understand why workers vote against even the most minimal break requirements. Is it simply that the majority of voters already work a job that gives them breaks and so don't see the need to make it a legal requirement? That seems very much like a "pull the ladder up behind you" mentality.

isx726552 1y ago

This feels like a narrative being pushed. Tech oligarchs these days are flexing by showing off how much they are able to bully government, and Altman wants to get in on the game by spinning things this way. I’m not convinced they really bent the rules for OpenAI any more than usual given they only employ a few hundred people.

colinmorelli 1y ago
OpenAI has over 5,000 employees. In addition to their headcount, they are now the highest valued private company in the world. They're going to have some leverage.
dmix 1y ago
I doubt OpenAI has to try very hard to convince state politicians, especially to the point of bullying. It's usually the complete opposite where they throw money at you to stay. Imagine if California managed to scare away the hottest company in the world and all the tax revenue it brings...

burningChrome 1y ago

Musk said the same thing about CA too. All CEO's make decisions based on what is best for them and their companies. There is no loyalty in business. Edward Niedermeyer, author of “Ludicrous: The Unvarnished Story of Tesla Motors,” said Musk was happy to benefit from California’s largesse when it suited him and to move on when he saw fit. “I think Musk has made the calculation that he’s gotten all the benefits he’s likely to get out of the state and he’s moving on to the next one,” Niedermeyer said. “The state of California clearly thought that all its work bought loyalty [from Musk] but, instead, I think it bought a sense of entitlement.” Elon Musk’s messy divorce with California leaves ugly grievances all around: https://www.latimes.com/california/story/2024-07-23/elon-musk-space-x-california https://www.latimes.com/california/story/2024-07-23/elon-mus...

thaumaturgy 1y ago

OpenAI announced $10 billion ARR in June of this year (https://www.cnbc.com/2025/06/09/openai-hits-10-billion-in-annualized-revenue-fueled-by-chatgpt-growth.html https://www.cnbc.com/2025/06/09/openai-hits-10-billion-in-an...). Agriculture in California hit $61 billion in annual receipts in 2024 (https://www.cdfa.ca.gov/statistics/ https://www.cdfa.ca.gov/statistics/). So, not that OpenAI isn't big, but, "the heart of the California economy"? OpenAI needs to IPO, because if they don't get in on the current meme stock economy, they're going to collapse.