The biggest problem with this is that there's basically no chance that the sale price of the non-profit assets is going to be $150 billion, which means that whatever the gap is between the valuation of the assets and the valuation of the company is pure profit derived from the gutting of the non-profit.
If this is allowed, every startup founded from now on should rationally do the same thing. No taxes while growing, then convert to for profit right before you exit.
Of course the investors do end up owning their shares at a lower basis than they would otherwise, and they end up a bit diluted compared to a straightforward investment, but the investors seem likely to more than make up for this by donating appreciated securities to the 501(c)(3) and by deferring or even completely avoiding the capital gains tax on their for-profit shares.
Obviously everyone needs to consult their lawyer about the probability of civil and/or criminal penalties.
The cleanest way for this to work is the for-profit to just sell more shares at the $150B valuation, diluting the non-profit entity below majority ownership. The for-profit board, which the non-profit could still probably have multiple seats on, would control the real asset, the non-profit would still exist and hold many tens of billions of value. It could further sell its shares in the non-profit and use the proceeds in a way consistent with its mission.
They wouldn't even have to sell that much - I am pretty sure the mega-fundrasing rounds from Microsoft etc brought the non-profit's ownership to just north of 50% anyway.
I don't see how this wouldn't be above board, it's how I assumed it was going to work. It would indeed mean that the entity that controls ChatGPT would now be answerable to shareholders, a majority of which would be profit seeking and a minority of which would be the non-profit with its mission, but non-profits are allowed to invest in for-profits and then sell those shares; all the calls for prosecutions etc seems just like an internet pitchfork mob to me.
The vast majority of taxes paid in developed nations are employee taxes and whatever national+local sales taxes and health/pension equivalent taxes are (indirectly) levied (usually 60-80% of national income). Asset taxes are a bit different.
It's true even in the bootstrapped company case: If you earn say $100k and keep $50k after all the employee indirect/direct taxes. Now imagine you spend $40k of that $50k in savings, setting up a business. You spend $30k on another employee, paying $15k of employer and employee taxes, and spend the other $10k on a company to do marketing (who will spend $5k of that on employees and pay $2.5k of tax), and you earn less than $40k in income, by the end of year 1 you have:
1) A loss-making startup which nonetheless is further along then nothing
2) Out of $100k of your original value, $67.5k has already reached the government within 12 months
3) Your time doing the tech side was not compensated but could not (for obvious anti-fraud reasons) be counted as a loss and as you have noted, you don't pay tax when you make a loss, and you don't get any kind of negative rebate (except certain sales tax regimes or schemes).
If you are in the US, the above is currently much worse due to the insane way R&D Software spend needs to be spread immediately as a tax burden.
So it's really not fair to say a new startup isn't paying taxes. They almost always are. There are very few companies or startups that pay less than 50% of their income to staff, and almost all of those are the unicorns or exceptional monopoly/class leaders. Startups, and founders tend to disproportionately give more of their income and are essentially to that extent re-taxed.
Even though you saved the money in order to start a startup, and paid your due employee taxes, you then have to pay employee taxes to use it, etc.
EDIT: I guess we do have employer tax as national insurance contributions too, always forget about that since I’ve always paid myself under that threshold
The Trump tax policy was a bizarre move for a country that relies so heavily on homegrown innovation. But then again, so was the entire Trump presidency.
Practically the same as selling, but technically not. Non-profit still gets to live up to it's original mission, on paper, but doesn't really do anything internally.
The non-profit’s asset is the value of OpenAI minus the value of its profit-participation units, i.e. the value of the option above the profit cap. Thus, it must be less than the value of OpenAI. The non-profit owns an option, not OpenAI.
― L. Ron Hubbard
