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NEW YORK — Artificial intelligence maker OpenAI could face an expensive and impractical balance sheet given its nonprofit origins, even though its valuation recently exploded to $157 billion.

Nonprofit tax experts have been closely watching OpenAI, the creator of ChatGPT, since last November, when its board ousted and rehired CEO Sam Altman. Now, some believe the company may have reached — or exceeded — the limits of its corporate structure, in which it is organized as a nonprofit with a mission to develop artificial intelligence for the benefit of “all humanity,” but with for-profit subsidiaries under its umbrella. control.

Jill Horwitz, a professor of law and medicine at UCLA Law School who has studied OpenAI, said that when two parties in a joint venture between a nonprofit and a for-profit company come into conflict, the charitable objective must always prevail.

“It is the job of the board first, then the regulators and the court, to ensure that the promise that was made to the public to pursue the charitable interest is kept,” she said. declared.

Altman recently confirmed that OpenAI was considering a company restructuring, but did not provide any details. However, a source told The Associated Press that the company was exploring the possibility of transforming OpenAI into a public benefit corporation. No final decision has been made by the board and the timing of the change has not been determined, the source said.

In the event that the nonprofit loses control of its subsidiaries, some experts believe OpenAI may have to pay for the interests and assets that belonged to the nonprofit. So far, most observers agree that OpenAI has carefully orchestrated its relationships between its nonprofit and its various other companies to try to avoid this.

However, they also view OpenAI as ready for scrutiny by regulators, including the Internal Revenue Service and state attorneys general in Delaware, where it is incorporated, and California, where it operates.

Bret Taylor, chairman of the nonprofit OpenAI’s board of directors, said in a statement that the board is focused on upholding its fiduciary duty.

“Any potential restructuring would ensure that the nonprofit organization continues to exist and thrive, and that it receives the full value of its current stake in the for-profit OpenAI organization with an increased ability to continue its mission” , he said.

Here are the top questions nonprofit experts are asking:

How could OpenAI move from a non-profit to a for-profit organization?

Tax-exempt nonprofit organizations sometimes decide to change their status. This requires what the IRS calls a conversion.

Tax law requires that money or assets donated to a tax-exempt organization remain in the charitable sector. If the original organization becomes a for-profit organization, a conversion is generally required when the for-profit organization pays the fair market value of the assets to another charitable organization.

Even if the nonprofit OpenAI continues to exist in some way, some experts say it should receive fair market value for any assets transferred to its for-profit subsidiaries.

In the case of OpenAI, the questions are numerous: which assets belong to its non-profit organization? What is the value of these assets? Do they include intellectual property, patents, commercial products and licenses? Also, what is the point of giving up control of for-profit subsidiaries?

If OpenAI were to lessen its nonprofit’s control over its other business entities, a regulator could demand answers to these questions. Any changes to OpenAI’s structure will require it to comply with laws governing tax-exempt organizations.

Andrew Steinberg, an attorney at Venable LLP and a member of the American Bar Association’s nonprofit committee, said it would be an “extraordinary” transaction to change the subsidiary structure of an exempt nonprofit organization. ‘tax.

“This would be a complex and complex process, with many legal and regulatory considerations to take into account,” he said. “But it’s not impossible.”

Is OpenAI fulfilling its charitable mission?

To qualify for tax-exempt status, OpenAI had to go to the IRS and explain its charitable purpose. OpenAI provided The Associated Press with a copy of that September 2016 application, which shows how much the organization’s plans for its technology and structure have changed.

OpenAI spokesperson Liz Bourgeois said in an email that the organization’s missions and goals remain constant, even as the way it accomplishes its mission has evolved alongside technological advances.

When OpenAI incorporated as a nonprofit in Delaware, it wrote that its goal was “to provide funding for the research, development, and distribution of technologies related to artificial intelligence.” In its tax filings, the company also describes its mission as building “general-purpose artificial intelligence (AI) that safely benefits humanity, unconstrained by the need to generate financial return.” .

Steinberg said there is no problem with the organization’s plans changing as long as it reports that information in its annual tax filings, which it has.

But some observers, including Elon Musk, who served as a board member and early supporter of OpenAI and who sued the organization, are skeptical that it will be true to its mission.

The “godfather of AI” Geoffrey Hinton, co-winner of the Nobel Prize in physics on Tuesday, also expressed concern about the evolution of OpenAI, openly boasting that one of his former students, Ilya Sutskever, who later co-founded the OpenAI organization, helped oust Altman as CEO before bringing him back.

“OpenAI was created with a focus on security. His primary goal was to develop artificial general intelligence and ensure its security,” Hinton said, adding that “over time, it turned out that Sam Altman was much less concerned about security than he was about profits. . And I think that’s unfortunate.

Sutskever, who led a team focused on AI security at OpenAI, left the organization in May and started his own AI company. OpenAI for its part says it is proud of its security record.

Will OpenAI board members avoid conflicts of interest?

Ultimately, this question comes down to OpenAI’s nonprofit board and the extent to which it acts to promote the organization’s charitable mission.

Steinberg said any regulator reviewing a nonprofit board’s decision will be most interested in the process by which it arrived at that decision, not necessarily whether it made the best decision.

He said regulators “often defer to the business judgment of board members as long as transactions do not involve a conflict of interest for any board member.” They will not benefit financially from this transaction.”

The question of whether board members would benefit financially from a change in OpenAI’s structure could also be of interest to nonprofit regulators.

In response to questions about whether Altman could receive equity in the for-profit subsidiary as part of a possible restructuring, OpenAI Board Chairman Taylor said in a statement: “The Board of Directors has had discussions about whether this would be beneficial to the company and our mission. Should Sam be paid in equity, but no specific numbers have been discussed or decisions made.