Catenaa, Thursday, July 23, 2026- OpenAI and Anthropic employees will face a tax system designed to take its cut before the windfall arrives when both companies go public.
The two companies are expected to go public later this year or early next, and the IPOs could create about 12,000 new millionaires. For most, the events will trigger federal and state tax bills, as well as a withholding shortfall, on wealth they may not be able to touch for months.
The federal government taxes stock grants under rules most employees have never encountered. California, where most of these prospective millionaires live, collects its own share, and employers routinely withhold far less than what’s owed. All of that leaves employees to make up the difference on their own.
Most tech employees receive stock compensation in one of two forms. The simpler kind is taxed the moment an employee exercises it.
The difference between the company’s discounted price and the stock’s current value is treated as regular wages, and the bill is immediate.
Incentive stock options appear to be a better deal. Under normal federal rules, employees owe nothing when they exercise, and the tax is deferred until they sell.
But the deferral triggers a separate problem. The IRS runs a parallel tax system designed to catch income that’s invisible under the normal rules.
When an employee exercises incentive options, the gain that was deferred under the standard system becomes taxable under the parallel one. The IRS treats the difference between the discounted price and the current value as income in the year of exercise, even if the employee never sold a share and has no cash to pay the bill.
For employees who received options years ago when their company was worth a fraction of its current valuation, that gap can be enormous, and the resulting bill can reach six figures.
There is one workaround. Employees who receive stock before it’s fully earned can file a special election with the IRS within 30 days, locking in the taxable value at the stock’s price on that date.
At an early-stage startup, that price can be close to zero, which means all future appreciation is taxed only at sale and at the lower long-term rate. But the 30-day window is absolute. The IRS grants no extensions.
Employers compound the problem by withholding too little. When stock compensation vests, employers typically withhold at a 22% rate, even when the employee’s actual rate is 37%.
The difference on a large vesting event can run into hundreds of thousands of dollars, and many employees don’t discover the shortfall until they file their returns the following spring.
California adds a second tax bill on top of the federal one. The state’s top income tax rate is 13.3%, which includes a 1% surcharge on income above $1 million that was originally enacted to fund mental health services.
For an employee with $5 million in stock gains, the combined federal and state marginal rate can exceed 50%.
