OpenAI Tender Offer Taxes: What Employees Need to Know Before Selling

Key takeaways

1. OpenAI withholds nothing on tender offer proceeds, which means paying the tax falls entirely on you.

2. Underpayment penalties can often be avoided or reduced with planning during the year.

3. In California, once your adjusted gross income reaches $1 million, the prior year safe harbor no longer applies.

4. The annualized income installment method lets you make larger estimated payments after the tender.

If you work at OpenAI and you’ve heard rumblings of a tender offer, here’s what you should know.

What is an OpenAI tender offer?

The company is offering you a chance to sell shares that you otherwise wouldn’t be able to sell until they were on a publicly traded open market. Since your OpenAI shares still can’t be sold publicly, a tender offer is the company, or investors it lines up, saying, “we’d happily take those off your hands.”

PPUs vs. RSUs: what’s the difference?

PPUs or RSUs are your slice of the pie. These were granted when employment began, and sometimes again through refresh grants, and vest over a set schedule (usually 4 years).

PPUs, or Profit Participation Units, were OpenAI’s original form of equity. They’re partnership interests, which are a contractual right to a portion of the company’s profit, and PPU holders have typically received annual K-1s, with Aestas listed as the partnership. When OpenAI restructured in October 2025, PPUs were reportedly converted into regular shares, keeping their original basis and holding period.

RSUs, or Restricted Stock Units, are the most common form of equity compensation, and they’re what OpenAI now issues to new employees. RSUs are shares of company stock.

How do tender offers affect your taxes?

These windfall events can create significant wealth, which can push you into higher tax brackets and, sometimes more importantly, create large underpayment penalties.

What are underpayment penalties, and how do you avoid them?

Underpayment penalties occur when you don’t pay enough tax during the year. As long as you hit the safe harbor through taxes withheld or paid in estimates, you can avoid or significantly reduce the penalties.

From a federal standpoint, you’re safe if your withholding and estimates cover the lesser of:

1. 100% of last year’s tax (110% if high income*), or

2. 90% of this year’s tax.

If you’re in California, once your adjusted gross income reaches $1 million*, the 100%/110% safe harbor is no longer available, and you’re forced to use the 90% figure.

Sometimes you’ll automatically satisfy the safe harbor through withholding. This can happen when wages increase and an accompanying withholding increase follows. Withholding also has an advantage over estimates: it’s treated as paid evenly throughout the year, no matter when it actually happens. But if your income increases due to non-wage income, you may get penalized and not know about it until you file your tax return in March or April of the following year. This happens because income goes up, but tax withheld doesn’t increase at the rate required to satisfy either safe harbor.

Depending on when the tender offer or windfall event happens, it may be necessary to make an estimated payment during that quarter. That way you can avoid or reduce the underpayment penalty, which can be significant and punitive. I’ve seen one as high as $40,000 in a recent case, and much of it could have been prevented with a conversation during the year rather than at tax time. The tax authorities also generally won’t waive this penalty after the fact.

How are tender offer proceeds taxed?

When you sell your vested shares, you owe capital gains tax on the gain, meaning the sale price minus your basis. For former PPUs with an 83(b), your basis is $0, which means nearly the whole sale is gain. For RSUs, your basis is the value you were already taxed on at vesting.

How much tax you owe depends on how long you held the shares. For RSUs, the clock starts when they vest. Federally, long-term gains (held more than one year) are taxed at 0%, 15% or 20%, and short-term gains at ordinary rates up to 37%. Most people at this income level will also owe the 3.8% net investment income tax. California taxes all capital gains as ordinary income, at rates up to 13.3%.

With RSUs, you also owe ordinary income tax when they vest. In the case of PPUs, that’s likely not the case.

What is an 83(b) election, and why does it matter for PPUs?

Enter the 83(b) election. An 83(b) election is an IRS provision allowing the recipient of restricted stock or early-exercised options to pay taxes on the asset’s fair market value at the grant date rather than when it vests. This election can significantly reduce taxes when shares increase in value. RSUs aren’t eligible for an 83(b), which means this applies to your original PPUs.

Your PPUs only gave you a share of the company’s growth after the day they were granted. The value that already existed belonged to everyone who came before you. That’s why your PPUs were worth $0 on paper at grant, and why filing an 83(b) election cost nothing but can save you a great deal. You locked in that $0 starting point, meaning future growth is only ever taxed as capital gain when you sell, and that carried over to the shares your PPUs converted into.

Does OpenAI withhold taxes on tender offer proceeds?

Remember how we mentioned withholding saving you from underpayment penalties and helping to satisfy the safe harbor? On the actual tender offer dispositions, the company will withhold nothing. Zero. None. You can throw that out the window. Withholding won’t save you here.

It falls 100% on you to make sure the tax is paid correctly and fully, more commonly through estimates. You could increase withholding on your future pay, but that’s probably not going to happen, since there usually isn’t enough wage income left in the year to cover the significant tax created.

How do estimated tax payments work after a tender offer?

Estimates are quarterly payments to the IRS, or the Franchise Tax Board if you’re in California. Ideally, your estimates and withholding together cover your safe harbor, paid in four equal 25% installments, because it’s presumed that your income comes in evenly throughout the year.

California is slightly different in that they only want three installments, for their own cash flow purposes, with the first being 30%, the second being 40%, and the third being the remaining 30%.

But in unexpected windfall events like tender offers, chances are the estimates originally set for the year won’t be enough to cover your full tax liability, since the tender wasn’t a consideration when they were created. You’ll need to increase your payments.

If the tender event happens after April 15 of the current year, there’s no way to keep the estimates at equal installments. Your tax liability has ballooned due to the event, and there’s no going back to increase the April 15 payment. Now that your tax liability is much greater than expected, and that first quarter estimate is locked in and too little, this can create an underpayment and a corresponding underpayment penalty.

What are you supposed to do now? Increase the next payment to make up for the shortfall. But I thought payments had to be equal throughout the year? Well, you’re allowed to make unequal payments as long as we can properly demonstrate that the income was received unequally throughout the year. We do this through the annualization method.

What is the annualized income installment method?

Without getting too tax talk heavy, let’s walk through an example. Say your prior year California tax was $30,000. Using the 110% safe harbor, you’d need $33,000 paid in during the year. Your paycheck withholding was on pace to cover $24,000 of that, and your estimates were set to cover the remaining $9,000: $2,700 in April, $3,600 in June, and $2,700 in January.

Then in October, you receive $5 million from the tender. Your adjusted gross income jumps past $1 million, the prior year safe harbor no longer applies, and you now need to have paid in 90% of a current year tax bill that just grew by hundreds of thousands of dollars. Your withholding won’t come close to covering that, and neither will the estimates you already made in April and June. Those payments were right for the year you expected, not the year you got.

And with October proceeds, the next California payment isn’t until January 15, since California has no September installment. Federally, September 15 has also passed, making January 15 the catch-up date on both sides.

You’ll drastically increase the final payment to make up for the shortfall. But when the FTB looks at your tax return, unless you can demonstrate that the income wasn’t received equally throughout the year, they’ll hammer you for the shortfall, and it will be significant.

How do we prevent this? Enter the annualized income installment method. This method allows us to calculate estimates based on when income was actually received. As long as we demonstrate this on the tax return through Form 5805 (California) or Form 2210, Schedule AI (federal), we can significantly reduce, or possibly eliminate, the underpayment penalty. The same logic applies to your federal estimates.

How much of my OpenAI stock should I sell in a tender offer?

That’s not really a question for your tax advisor. I’d be more than happy to walk through the tax implications of the sale, but deciding how much to sell is a conversation for your financial advisor, or one you have to weigh internally. Really, it comes down to whether you believe in the long-term outlook of the company, whether you want to diversify, what your cash needs are, and your stomach for a large tax bill. Working for companies like this, you’re usually heavily concentrated in company stock, which is very much tied to how the company does, short term and long term. The answer is, it depends.

What I can do is model the tax at a few different sale amounts, giving you real numbers to decide with.

When should you talk to a tax advisor about a tender offer?

The short answer: as soon as possible. You want to get ahead of this to make sure you have liquidity available to pay the taxes if necessary. You also want an idea of the tax implications to make an educated decision without rushing into it. These are typically very large numbers and not something you want to walk backwards into. You want to be proactive about the decision and know exactly how it’s going to affect your situation from a tax standpoint, because those are very real, very big numbers.

If you need help modeling how much to sell and what the tax implications are, reach out. I’d be happy to have a chat and help you build a plan that fits your needs.

Frequently asked questions

Does OpenAI withhold taxes when I sell in a tender offer?

No. Nothing is withheld on tender offer proceeds, and you’re responsible for paying the tax, usually through estimated payments.

Are tender offer proceeds taxed as capital gains?

Generally, yes, on the gain above your basis. Long-term or short-term rates depend on how long you held the shares, and California taxes all capital gains as ordinary income.

Does OpenAI still issue PPUs?

No. OpenAI now issues RSUs to new employees, and existing PPUs were reportedly converted into regular shares during the October 2025 restructuring.

Can I be penalized even if I pay everything by April?

Yes. The penalty is based on paying enough during the year, and a large payment at filing time doesn’t erase it.

What if my tender proceeds came late in the year?

The annualized income installment method lets you show the income arrived late, which can reduce or eliminate the penalty for earlier quarters.

Notes

• *High income: for the 110% safe harbor, high income means adjusted gross income on your prior year return of more than $150,000 ($75,000 if married filing separately). California uses the same threshold. Separately, California removes the prior year safe harbor entirely once current year adjusted gross income is $1,000,000 or more ($500,000 if married filing separately).

• Federal estimate due dates: April 15, June 15, September 15, and January 15 of the following year. Each is 25% of the required annual payment.

• California estimate due dates: April 15 (30%), June 15 (40%), and January 15 of the following year (30%). There is no September payment.

When a due date falls on a weekend or holiday, it moves to the next business day.