4 ms·

Aside from the disagreements between these parties, what about the precedent of running a non-profit, and then transferring all IP to a for profit when it’s con

Aside from the disagreements between these parties, what about the precedent of running a non-profit, and then transferring all IP to a for profit when it’s convenient to do so? I wonder if the government or taxpayers have a case to bring regarding that.

granzymes 4mo ago
This case sets no precedent one way or the other on that question. The IP was transferred to the for-profit for fair value in 2019, and Musk never argued otherwise in this case. The attorneys general of California and Delaware could challenge that 2019 IP transfer if they so wished on behalf of the public.
- chaseadam17 4mo ago
  Which they are unlikely to do because the California AG signed off on the original IP transfer agreement…
Morromist 4mo ago
Yeah. I wonder if the question "Did OpenAI steal a non-profit worth what is now maybe hundreds of billions of dollars?" will ever be answered. If not it will be one of the biggest heists in history.
- CPLX 4mo ago
  Of course that question has been answered. They stole it. Only people who are pretending to be confused are people for whom it's in their interest to be confused. They created a non-profit with the intention of launching AI to make sure that it would stay in the public trust, and then once it became really valuable, they spirited it away into private hands. It's just a fact. It's obvious from looking at the thing. The details are designed to confuse and trick you into thinking that what you can plainly see happening is OK somehow.
mrhottakes 4mo ago
Transactions like that happen all the time and are not problematic if handled legally. Any of the interested parties could have sued over it, but none have.
- adrr 4mo ago
  Because they got to participate in the early investment in the for profit entity. > Early Angels (Reid Hoffman, Peter Thiel, and others): Approximately $10 million invested, current value $1.4 billion. That corresponds to a return of around 140x. https://www.trendingtopics.eu/openai-cap-table-leak/ https://www.trendingtopics.eu/openai-cap-table-leak/
- atom_arranger 4mo ago
  The interested parties would be taxpayers. I think some groups are trying to look into it. The issue is that they did R&D as a charity, donations to which are tax deductible, there may also be other benefits to being a charity during R&D but that’s a big one, then once the thing works, setup a for profit, sell ip at “fair value”, get some investment, then things are ready for business. I read there’s no statute of limitations on a tax issue like this, so I guess it might be hanging over them indefinitely. I’m not a big taxation and government fan, they’d probably just waste the money anyways. It does seem unfair OpenAI gets to use this loophole though, unless all companies can make their R&D investment tax deductible, and get any other benefits of this setup.
  - Traster 4mo ago
    The interested parties are the taxpayers, and in this case the legal mechanism for that was the California Attorney General approving OpenAI's restructuring. Here's the MOU: https://oag.ca.gov/system/files/attachments/press-docs/Final%20Executed%20MOU%20Between%20OpenAI%20and%20California%20AG%20re%20Notice%20of%20Conditions%20of%20Non-Objection%20%2810.27.2025%29%20%28Signed%20by%20OpenAI%29%20%28Signed%20by%20CA%20DOJ%29.pdf https://oag.ca.gov/system/files/attachments/press-docs/Final... There is no loophole here.
- beambot 4mo ago
  Or more specifically: One just did sue, but lost because he waited too long.
gamblor956 4mo ago
The non-profit received shares in the for-profit as a result of the transfer. Those shares are theoretically worth hundreds of billions. If it had been a for-profit company contributing assets to another for-profit company, the transaction would not have had any different tax consequence.
- dnnddidiej 4mo ago
  Wasn't an arms length transaction so shennanigans (or lack of) cannot be proved. (This is just a thought IANAL)
az226 4mo ago
Or a self dealing conversion.
cm2187 4mo ago
The gvt won't have much of a leg to stand on until open ai actually turns a profit, until then how are taxpayers cheated? And by then it will be a taxable for profit corporation anyway.
Traster 4mo ago
Can we just bring some reality to this conversation. The non-profit still exists, it owns a significant chunk of a now almost trillion dollar company, and the for-profit wouldn't be profitable if it weren't for Billions of dollars of investment from Microsoft. There is no counter factual where OpenAI exists as a non-profit and still inexplicably gets handed billions of dollars of compute to train LLMs. The for-profit company is a different thing from the non-profit and it exists for perfectly understandable reasons and I'm unsure why anyone other than Elon Musk pretends this doesn't make sense. What is your proposed counter factual where the non-profit entity retains all ownership of the venture, but somehow finds hundreds of billions of dollars to train LLMs?
- atom_arranger 4mo ago
  An alternative chain of events might be one where OpenAI, Inc. only operated through income and donations, which would probably lead to them scaling more slowly. They could also take on loans. Having thought about this whole thing more I believe that non-profits should not be a separate type of entity that gets special tax treatment. People have different ideas of what constitutes legitimate non-profit activity. It just opens things up for tax avoidance and scams.

granzymes 4mo ago

This case sets no precedent one way or the other on that question. The IP was transferred to the for-profit for fair value in 2019, and Musk never argued otherwise in this case. The attorneys general of California and Delaware could challenge that 2019 IP transfer if they so wished on behalf of the public.

chaseadam17 4mo ago
Which they are unlikely to do because the California AG signed off on the original IP transfer agreement…

Morromist 4mo ago

Yeah. I wonder if the question "Did OpenAI steal a non-profit worth what is now maybe hundreds of billions of dollars?" will ever be answered. If not it will be one of the biggest heists in history.

CPLX 4mo ago
Of course that question has been answered. They stole it. Only people who are pretending to be confused are people for whom it's in their interest to be confused. They created a non-profit with the intention of launching AI to make sure that it would stay in the public trust, and then once it became really valuable, they spirited it away into private hands. It's just a fact. It's obvious from looking at the thing. The details are designed to confuse and trick you into thinking that what you can plainly see happening is OK somehow.

mrhottakes 4mo ago

Transactions like that happen all the time and are not problematic if handled legally. Any of the interested parties could have sued over it, but none have.

adrr 4mo ago
Because they got to participate in the early investment in the for profit entity. > Early Angels (Reid Hoffman, Peter Thiel, and others): Approximately $10 million invested, current value $1.4 billion. That corresponds to a return of around 140x. https://www.trendingtopics.eu/openai-cap-table-leak/ https://www.trendingtopics.eu/openai-cap-table-leak/
atom_arranger 4mo ago
The interested parties would be taxpayers. I think some groups are trying to look into it. The issue is that they did R&D as a charity, donations to which are tax deductible, there may also be other benefits to being a charity during R&D but that’s a big one, then once the thing works, setup a for profit, sell ip at “fair value”, get some investment, then things are ready for business. I read there’s no statute of limitations on a tax issue like this, so I guess it might be hanging over them indefinitely. I’m not a big taxation and government fan, they’d probably just waste the money anyways. It does seem unfair OpenAI gets to use this loophole though, unless all companies can make their R&D investment tax deductible, and get any other benefits of this setup.
- Traster 4mo ago
  The interested parties are the taxpayers, and in this case the legal mechanism for that was the California Attorney General approving OpenAI's restructuring. Here's the MOU: https://oag.ca.gov/system/files/attachments/press-docs/Final%20Executed%20MOU%20Between%20OpenAI%20and%20California%20AG%20re%20Notice%20of%20Conditions%20of%20Non-Objection%20%2810.27.2025%29%20%28Signed%20by%20OpenAI%29%20%28Signed%20by%20CA%20DOJ%29.pdf https://oag.ca.gov/system/files/attachments/press-docs/Final... There is no loophole here.
beambot 4mo ago
Or more specifically: One just did sue, but lost because he waited too long.

gamblor956 4mo ago

The non-profit received shares in the for-profit as a result of the transfer. Those shares are theoretically worth hundreds of billions. If it had been a for-profit company contributing assets to another for-profit company, the transaction would not have had any different tax consequence.

dnnddidiej 4mo ago
Wasn't an arms length transaction so shennanigans (or lack of) cannot be proved. (This is just a thought IANAL)

az226 4mo ago

Or a self dealing conversion.

cm2187 4mo ago

The gvt won't have much of a leg to stand on until open ai actually turns a profit, until then how are taxpayers cheated? And by then it will be a taxable for profit corporation anyway.

Traster 4mo ago

Can we just bring some reality to this conversation. The non-profit still exists, it owns a significant chunk of a now almost trillion dollar company, and the for-profit wouldn't be profitable if it weren't for Billions of dollars of investment from Microsoft. There is no counter factual where OpenAI exists as a non-profit and still inexplicably gets handed billions of dollars of compute to train LLMs. The for-profit company is a different thing from the non-profit and it exists for perfectly understandable reasons and I'm unsure why anyone other than Elon Musk pretends this doesn't make sense. What is your proposed counter factual where the non-profit entity retains all ownership of the venture, but somehow finds hundreds of billions of dollars to train LLMs?

atom_arranger 4mo ago
An alternative chain of events might be one where OpenAI, Inc. only operated through income and donations, which would probably lead to them scaling more slowly. They could also take on loans. Having thought about this whole thing more I believe that non-profits should not be a separate type of entity that gets special tax treatment. People have different ideas of what constitutes legitimate non-profit activity. It just opens things up for tax avoidance and scams.