OpenAI Faces IRS Complaint Over Alleged Tax Violations and Conflicts of Interest

The artificial intelligence company OpenAI is under scrutiny following a formal complaint filed with the Internal Revenue Service alleging potential tax law violations that could threaten its nonprofit status.

Watchdog Files Formal Complaint Against OpenAI

The Midas Project, an artificial intelligence watchdog organization, submitted a complaint to the US Internal Revenue Service on Thursday. The complaint accuses OpenAI of abandoning safeguards, maintaining conflicts of interest, and potentially misusing charitable funds.

According to the complaint, OpenAI's board structure creates conflicts of interest that violate federal rules governing tax-exempt nonprofits. The watchdog documented these alleged violations as part of their ongoing investigation into leading AI companies.

CEO Sam Altman's Dual Role Under Investigation

The complaint specifically targets CEO Sam Altman's dual role as both CEO of OpenAI's for-profit operations and board member of its nonprofit organization. This structure allegedly creates situations where Altman benefits personally at the nonprofit's expense.

The Midas Project states that Altman may receive equity in a new for-profit company, with his investments in companies partnering with OpenAI creating additional conflicts potentially worth hundreds of millions of dollars.

Given OpenAI's reported $300 billion valuation, Altman's expected equity stake in a restructured OpenAI entity could be worth billions of dollars.

Multiple Board Members Face Conflict Allegations

The complaint identifies several board members with alleged financial conflicts:

Chairman Bret Taylor co-founded Sierra AI, which resells OpenAI's models. Adam D'Angelo's company Quora serves as an OpenAI customer. Adebayo Ogunlesi's firm Global Infrastructure Partners owns data centers that profit from AI infrastructure demand.

These relationships raise questions about whether board members can make decisions that serve the nonprofit's mission rather than their personal financial interests.

About The Midas Project

The Midas Project describes itself as a nonprofit initiative founded in early 2024. The organization monitors, investigates, and reports on leading AI companies to ensure AI technology benefits everyone, not just the companies developing it.

The watchdog emphasizes that OpenAI was founded as a nonprofit to ensure advanced general intelligence benefits humanity rather than shareholders.

OpenAI's Nonprofit Status Evolution

OpenAI was originally founded in 2015 as a nonprofit organization by Elon Musk, Sam Altman, and other co-founders. The company's mission centered on developing artificial general intelligence that would benefit humanity.

In November, OpenAI entered preliminary talks with US regulators about transforming into a for-profit structure. However, the company reportedly abandoned these plans and reaffirmed its commitment to nonprofit status in May, noting that no final decisions had been made regarding restructuring.

Elon Musk's Legal Challenges

The tax violation complaint comes amid ongoing legal challenges from co-founder Elon Musk. In 2017, Musk originally advocated for OpenAI to become for-profit, but later sued the firm in March and again in August 2024.

Musk's lawsuits allege that OpenAI violated their original contract as a nonprofit venture and abandoned their original mission while pursuing profit. A Musk-led group of investors submitted a $97.4 billion bid to buy OpenAI in February, but Sam Altman rejected this offer.

Implications for AI Industry Regulation

The IRS complaint highlights broader concerns about corporate governance in the rapidly growing artificial intelligence sector. As AI companies scale quickly and attract massive valuations, questions arise about maintaining nonprofit missions while managing commercial interests.

The Midas Project concludes that as companies race toward powerful AI systems, any weakening of nonprofit protections could put the public interest at risk. They call for IRS investigation to preserve OpenAI's duty to humanity.

OpenAI's Response

OpenAI has not provided an immediate response to the tax violation allegations. The company continues to operate while the IRS complaint undergoes review.

The outcome of this investigation could set important precedents for how AI companies balance nonprofit missions with commercial operations, particularly as the industry continues its rapid growth and evolution.