California’s counting on an IPO tax windfall. Several factors are complicating the equation

The IPOs of SpaceX, OpenAI and Anthropic could create a tax windfall for the state of California.

The burst of tech wealth has drawn comparison to the 2012 IPO of Menlo Park-based Facebook, which generated $1.3 billion in taxes for the Golden State.

But the revenue impact may be blunted, due to how these employees' stock compensation was structured and because tech employees today have more tools at their disposal to mitigate their tax burden.

The blockbuster SpaceX IPO and potential upcoming public offerings for OpenAI and Anthropic could create a tax windfall for the state of California.

Yet the revenue boost may fall short of previous tech IPOs – at least relative to the firms' valuations – given the specific nature and tax treatment of today's tech compensation.

Following its IPO last week, SpaceX is now valued at $2.5 trillion, minting many of its employees who live and work near its Hawthorne, California, office as millionaires, at least on paper.

California-based Anthropic and OpenAI are also expected to go public later this year at valuations that could approach $1 trillion.

The burst of tech wealth has drawn comparison to the 2012 IPO of Menlo Park-based Facebook, which generated $1.3 billion in taxes for the Golden State, per the California Department of Finance's estimate.

Facebook's valuation at the time was just $104 billion, suggesting the new crop of super-IPOs could theoretically generate billions more.

But the revenue impact may be blunted, due to how these employees' stock compensation was structured and because tech employees today have more tools at their disposal to mitigate their tax burden, experts and financial advisors told CNBC.

As companies have stayed private for longer and reached sky-high valuations, financial institutions have increasingly catered to equity-rich, cash-poor startup employees with tax strategies that were traditionally only available to founders.

For instance, employees at some startups can get a tax deduction by donating private, pre-IPO stock to a donor-advised fund , according to Richard Lowry of wealth manager Cresset.

He said such donations were generally limited to the ultra-wealthy as recently as a decade ago, since few charitable organizations were equipped to accept or manage those assets. "Historically, the only people who had equity in a private company and were certainly in a position to give it away were millionaire or billionaire founders who already had their own controlled structures, like a private foundation, where they could decide what they accepted," said Lowry, managing director and head of tax strategy at Cresset. "Now there is a cottage industry around allowing people to avail themselves of this." There's also a timing consideration on the SpaceX windfall.

Tax revenue generated by an IPO largely comes from two sources: ordinary income taxes on employees' restricted stock units , or RSUs, when they vest and capital gains taxes paid when shareholders sell appreciated stock.

SpaceX uses a unique stock-pay structure that may have pulled forward the tax revenue on the vesting of employees' shares.

At most private companies, RSUs vest after two conditions are met: continued employment with the company and a liquidity event like an IPO or acquisition.

This dual-trigger RSU structure leads to a boom in taxable income on IPO day.

Many SpaceX employees, however, have been paying income taxes on their RSUs for years as share vesting was only tied to employment, not a liquidity event.

This stock-pay structure has made it challenging to estimate tax revenue associated with the SpaceX IPO, according to the California Legislative Analyst's Office. "Revenue totals will depend more on financial decisions made by employees and investors who hold pre-IPO SpaceX shares and stock options," the LAO wrote in a statement. "Relative to past IPOs, tax revenues from the SpaceX IPO are likely to be less immediate and more unpredictable." The LAO, which advises state lawmakers on budget and fiscal policy, has not published tax revenue estimates for the IPOs of SpaceX, Anthropic or OpenAI.

That said, the LAO's statement to CNBC was cautiously optimistic that the market debuts would pad the state's coffers. "Past major tech IPOs have generated significant income tax revenue for the state and these upcoming IPOs certainly have the potential to do the same," the statement reads.

The California Department of Finance also has not published revenue estimates for the IPOs, citing the risk that companies frequently delay their IPOs in the event of a market downturn.

OpenAI and Anthropic, which each filed confidential S-1s in recent weeks, could do the same.

The Department has reason to be conservative as market swings have undermined its revenue forecasts before.

It had to revise its revenue estimate from the Facebook IPO from $1.9 billion to $1.3 billion after the social media giant's share slump.

The Department's budget report noted another factor that could limit the upside from IPOs: the growing trend of private companies allowing employees to sell stock before going public, reducing the backlog of stock taxed upon IPO.

Employees at SpaceX, Anthropic and OpenAI have had ample opportunity to take some chips off the table well before a public offering.

In October, OpenAI finalized a secondary share sale totaling $6.6 billion in which current and former employees could sell their shares at a $500 billion valuation.

CNBC previously reported that OpenAI plans to facilitate a tender offer at a $852 billion post-money valuation.

Tender offers have grown in popularity as a way to reward employees and investors as the timeline to exit has grown longer, according to Hamza Shad, insights manager at startup equity management firm Carta.

Gains on these sales are still taxed, but selling earlier pulls that tax revenue forward and makes it less predictable for regulators, he said. "In the past, when early pre-public liquidity wasn't as prevalent, the tax revenue woul