Meta Asks the US Government To Block OpenAI's Switch To a For-Profit

Meta is asking California Attorney General Rob Bonta to block OpenAI's planned transition from a non-profit to for-profit entity. From a report: In a letter sent to Bonta's office this week, Meta says that OpenAI "should not be allowed to flout the law by taking and reappropriating assets it built as a charity and using them for potentially enormous private gains."

The letter goes so far as to say that Meta believes Elon Musk is "qualified and well positioned to represent the interests of Californians in this matter." Meta supporting Musk's fight against OpenAI is notable given that Musk and Mark Zuckerberg were talking about literally fighting in a cage match just last year.

OpenAI started as a non-profit but stumbled into commercial success with ChatGPT, which now makes billions of dollars a year in revenue. CEO Sam Altman has been clear that the company needs to shed its non-profit status to become more attractive to investors and continuing funding its ambitions.

alternatively...

[Doctor Device]

how about we allow the transition, but OpenAI must accept (and pay in full), whatever the state determines is an appropriate amount of back taxes for their time as a "non-profit"

Re:

[dmay34]

The back taxes would probably be Zero since until this past year it's had no revenue.

Re:

[commodore73]

But there isn't any profit to tax? According to ChatGPT:

"As of December 2024, OpenAI has not yet achieved profitability. Despite generating substantial revenue, the company anticipates a loss of approximately $5 billion this year, primarily due to significant operational expenses, including computing infrastructure and talent acquisition."

I don't see this changing any time soon, even with a $200/month plan.

Re:alternatively...

[Whateverthisis]

It's not about back taxes. Assets developed in a non-profit cannot be converted to a for-profit enterprise in nearly every situation, otherwise it'd be extremely easy to abuse. The way this generally is done is to create a for-profit entity, and then the for-profit liquidates the assets of the non-profit by buying them from the non-profit. The non-profit then distributes the assets for it's charitable purpose.

So in the usual way this is done, ForProfitAI would have to raise enough money to buy the assets from OpenAI to develop them, and you'd be required to have different representatives on both sides of the transaction. It's not impossible, but it would require billions of dollars in ForProfitAI to buy the assets of OpenAI at a fair market price. If they don't follow this process, they're open to major investigations from the IRS; the IRS takes this kind of thing very seriously.

I'm not saying it can't be done, but it's not easy to do given their size.

Re:

[mysidia]

ForProfitAI would have to raise enough money to buy the assets from OpenAI to develop them

There is a problem even with this. A 501c3 is prohibited from having any of its revenue, contributions, etc, inure to the private benefit.

If your ForProfitAI owned by your non-profit's managers are proposing to Pay $X for those assets, but that price is not high enough, and OtherCompany such as Meta would be willing to pay $X + 10 for those assets, Then your management would be committing an act of Self-deal

Not unusual

[Registered Coward v2]

Non-profits have set up for profit subs to commercialize things they have developed.

Re:Not unusual

[thecombatwombat]

That's not the same as what they're trying to do. Non-profits are allowed to make money.

What they *aren't* allowed to do, is to sell ownership on a stock exchange . . . there's no huge going public exit for the founders of a non-profit.

The non-profit structure of groups like Mozilla, Signal, and Proton, keeps them from being acquired, not from making money. The board is answerable to a charter/mission statement, not to shareholders.

Sorry Zuck

[GrahamJ]

Trump already has Musk for a fluffer, you'll have to get in line.

Re:

[evanh]

New suitors are always welcome. Trump's bread and butter is the demanding of bribes. I'm sure he won't mind some one-upmanship also.

Hey, another potential loony match fight. Zuck vs Musk, in the Whitehouse, with Trump as the equally loony referee. That's about the right level the President of USA is at now.