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posted by takyon on Friday December 04 2015, @02:29PM   Printer-friendly
from the soylent-pbc dept.

Jesse Eisinger writes in the NYT that if you heard that Mark Zuckerberg donated $45 billion to charity, you are wrong. Here's what really happened: Zuckerberg did not set up a charitable foundation, which has nonprofit status. Instead Zuckerberg created an investment vehicle called a limited liability company (LLC) that can invest in for-profit companies, make political donations, and lobby for changes in the law. What's more an LLC can donate appreciated shares to charity, which will generate a deduction at fair market value of the stock without triggering any tax. "He remains completely free to do as he wishes with his money," writes Eisinger. "That's what America is all about. But as a society, we don't generally call these types of activities "charity.""

A charitable foundation is subject to rules and oversight. It has to allocate a certain percentage of its assets every year. The new Zuckerberg LLC won't be subject to those rules and won't have any transparency requirements. According to Eisinger what this means is that Zuckerberg has amassed one of the greatest fortunes in the world — and is likely never to pay any taxes on it. "Instead of lavishing praise on Mr. Zuckerberg for having issued a news release with a promise, this should be an occasion to mull what kind of society we want to live in," concludes Eisinger. "The point is that we are turning into a society of oligarchs. And I am not as excited as some to welcome the new Silicon Valley overlords."

Previously: Mark Zuckerberg to Donate $45 Billion Facebook Fortune to Charity


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  • (Score: 5, Informative) by takyon on Friday December 04 2015, @02:47PM

    by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Friday December 04 2015, @02:47PM (#271796) Journal

    rebuttal from the zuck [marketwatch.com]
    FB post [facebook.com]

    The Chan Zuckerberg Initiative is structured as an LLC rather than a traditional foundation. This enables us to pursue our mission by funding non-profit organizations, making private investments and participating in policy debates -- in each case with the goal of generating a positive impact in areas of great need. Any net profits from investments will also be used to advance this mission.

    By using an LLC instead of a traditional foundation, we receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative, but we gain flexibility to execute our mission more effectively. In fact, if we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an LLC we do not. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.

    What's most important to us is the flexibility to give to the organizations that will do the best work -- regardless of how they're structured. For example, our education work has been funded through a non-profit organization, Startup:Education, the recently announced Breakthrough Energy Coalition will make private investments in clean energy, and we also fund public government efforts, like the CDC Ebola response and San Francisco General Hospital.

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  • (Score: 2, Insightful) by Anonymous Coward on Friday December 04 2015, @02:51PM

    by Anonymous Coward on Friday December 04 2015, @02:51PM (#271800)

    Or translated and shortened: "don't pay attention to the criticisms on my actions, here are some shiny bobbles instead... look shiny!"

    • (Score: 2) by Gaaark on Saturday December 05 2015, @01:30AM

      by Gaaark (41) on Saturday December 05 2015, @01:30AM (#272036) Journal

      Oooh-hoo-hoo! More! More shinies!!!! Weeee!

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  • (Score: 0) by Anonymous Coward on Friday December 04 2015, @03:01PM

    by Anonymous Coward on Friday December 04 2015, @03:01PM (#271805)

    Oblig: they'll make investments in nonprofit institutions that don't zuck.

    It sounds like the fact check goes like this:

    - Zuck's Charity isn't a charity - it's really an investment vehicle for himself and his wife true

    - Zuck is using this as a gigantic tax shelter false

    • (Score: 2, Interesting) by Anonymous Coward on Friday December 04 2015, @03:45PM

      by Anonymous Coward on Friday December 04 2015, @03:45PM (#271819)

      - Zuck is using this as a gigantic tax shelter for his children : true

      This depends on when they were gifted the shares in the the LLC now doesnt it?

      You get 100billion shares in a company worth 1 cent. How much in taxes do you owe? Let it ride for 1-2 years. You probably do not even report it. Or maybe you do to make it 'legal'.

      Suddenly you have a 'angel' investor. They demand 1 share for themselves but a capex investment of 54 billion dollars. Which has a yield of say 1 dollar a year. Then when you die you only have 1 share in a company worth billions and the remaining 'investors' have the majority of the shares. Meaning the taxes are on a few million dollars. With one *really* crappy investment.

      I saw this a few days ago. It looked nothing more than a tax dodge (for his children). It is not the first time he has used charitable donations to do so.

      Take for example the Vanderbilts. The 'rumor' in my area is they donated the large Biltmore estate to the city of Asheville. Decidedly not true. They turned a money sink into a 'charitable' business. That by the back of my envelope math makes 200 million a year. Even the narrative of their business is how altruistic they are to let you walk around there at 60 bucks a head. Make sure you swing by the gift shop to buy a 200 dollar replica chess set and a 15 dollar bottle of wine. https://en.wikipedia.org/wiki/The_Biltmore_Company [wikipedia.org] Amazing place to see though.

      • (Score: 0, Disagree) by Anonymous Coward on Friday December 04 2015, @04:36PM

        by Anonymous Coward on Friday December 04 2015, @04:36PM (#271843)

        Put down the crack pipe and read the story.

      • (Score: 2) by frojack on Friday December 04 2015, @07:34PM

        by frojack (1554) on Friday December 04 2015, @07:34PM (#271916) Journal

        You pay capital gains on any appreciating investment. Yes, you have to report it.

        They could set up a 401k for their kids to assure they will have a comfortable retirement, but when they start drawing on that they will pay taxes.

        Everyone things this is a Tax Dodge, but a LLC really isn't (by itself) a tax dodge. In most cases it is what the IRS calls a "Disregarded Entity", because all taxes flow through to the LLC owners.

        Yes, this structure lets him do more of what HE wants with the money.

        But NO, he isn't going to dodge much in the way of taxes that he couldn't have dodged by just holding those assets in his own name. I'm sure there are some taxes avoided, (He can afford the best tax lawyers in the world), but its not the windfall that TFS/TFA leads you to believe.

        Charity gifts are a write off in either case.

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        • (Score: 0) by Anonymous Coward on Saturday December 05 2015, @02:57AM

          by Anonymous Coward on Saturday December 05 2015, @02:57AM (#272062)

          Its called being poor on paper. The way an accountant explained it to me.

          You look like you are making 18k a year. But your company makes 200k a year. But all the taxes are held inside the LLC. You think they cant setup a double Irish with a twist? Your company still has to pay taxes on *new* money. But existing money is a capex investment. It is the same way i can invest money into facebook itself. I buy shares. I am not taxed on that money until I sell the shares. The money invested can basically be disappeared. He even said how he is going to do it. He is going to use the LLC to invest it into other companies. If it worked your way. If I started a company and it was between me and 5 other people. They all invest 1 dollar. I invest 1 million dollars. Now with your way they all owe taxes on that one million. The way it works in the real world is typically I get more shares and they get less. The business gets the one million to invest as it sees fit.

          Disregarded Entity would have one owner. Adding more owners is easy. They are all of your children, your family (aunts uncles, etc), your wife, etc...

          You seem to think the accountants that achieved the effective 0 tax rate for facebook cant do the same thing for the LLC?

    • (Score: 2) by takyon on Friday December 04 2015, @03:45PM

      by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Friday December 04 2015, @03:45PM (#271820) Journal

      At $45 billion with a goal of eliminating disease, any "charity", "investment", or "charitable investment" could benefit them.

      We are talking about a 30 and 31 year old. There is a good chance diseases like Alzheimer's will be eliminated within the next 30 years, in small part due to investment vehicles like this.

      Of course, since no money has been given out to anyone yet, we only have the promises to go on.

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      • (Score: 0) by Anonymous Coward on Friday December 04 2015, @04:05PM

        by Anonymous Coward on Friday December 04 2015, @04:05PM (#271828)

        > At $45 billion with a goal of eliminating disease, any "charity", "investment", or "charitable investment" could benefit them.

        That's not really what people mean they talk about it being self-serving. Its more about the "doing good while doing well" mindset - that zuckerberg will personally benefit from the charity's operations in ways that the general public will not.

        • (Score: 3, Insightful) by takyon on Friday December 04 2015, @04:59PM

          by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Friday December 04 2015, @04:59PM (#271854) Journal

          Hmm, well I'm not tooooo concerned about some of the $45 billion rubbing off back into Zuck's coffers.

          For all the criticism [techrights.org] the Gates Foundation gets around here, the Zuck LLC may be even more transparently self-serving for the founder. Since one of the goals seems to be increasing Internet access... which could mean more profits for Facebook. And since the shares will be given to the LLC over a long period of time, they get more money if the LLC's activities increases the value of Facebook..

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          • (Score: 0) by Anonymous Coward on Friday December 04 2015, @05:24PM

            by Anonymous Coward on Friday December 04 2015, @05:24PM (#271863)

            > Hmm, well I'm not tooooo concerned about some of the $45 billion rubbing off back into Zuck's coffers.

            It's his right. Just don't call it charity.

            > Since one of the goals seems to be increasing Internet access...

            You just know that's going to be all about increasing access to the facebook walled garden, aka facebook-zero. [wikipedia.org]

      • (Score: 2) by pe1rxq on Friday December 04 2015, @06:34PM

        by pe1rxq (844) on Friday December 04 2015, @06:34PM (#271900) Homepage

        For me the big problem is that $45 billion ended up being invested in an over-hyped advertising company in the first place.

  • (Score: -1, Redundant) by Anonymous Coward on Friday December 04 2015, @03:05PM

    by Anonymous Coward on Friday December 04 2015, @03:05PM (#271806)

    Do you really expect any soylentil to NOT have facebook.com and www.facebook.com in their hosts file happily pointing back to 127.0.0.1 (ain't no place like home)?

    • (Score: 2) by takyon on Friday December 04 2015, @03:11PM

      by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Friday December 04 2015, @03:11PM (#271807) Journal

      That's why you got 2 links and the important bits in a blockquote.

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      • (Score: 0) by Anonymous Coward on Friday December 04 2015, @03:25PM

        by Anonymous Coward on Friday December 04 2015, @03:25PM (#271814)

        And I thank you for it... Please continue your good work

    • (Score: 1, Funny) by Anonymous Coward on Friday December 04 2015, @04:13PM

      by Anonymous Coward on Friday December 04 2015, @04:13PM (#271831)

      127.6.6.6 — home of the evil. ;-)

  • (Score: 3, Interesting) by kadal on Friday December 04 2015, @03:21PM

    by kadal (4731) on Friday December 04 2015, @03:21PM (#271813)

    Vox had a similar explanation (http://www.vox.com/2015/12/2/9836884/zuckerberg-llc)

    One reason very wealthy philanthropists have traditionally set up charitable trusts is that they've been motivated in part by the desire to create enduring institutions that long outlive them. Things like the Ford Foundation, the Rockefeller Foundation, and the Carnegie Foundation are still alive and well generations after their creation. The recent trend, however, has been toward trying to spend all the money within a finite span of time rather than creating an infinitely lived grantmaking institution. Under those circumstances, the LLC structure has a lot of advantages, and it's not surprising to see Silicon Valley donors starting to opt for it.

    • (Score: 2) by Runaway1956 on Friday December 04 2015, @03:33PM

      by Runaway1956 (2926) Subscriber Badge on Friday December 04 2015, @03:33PM (#271817) Journal

      I thought you were talking about THIS Vox! http://voxday.blogspot.com/ [blogspot.com]

      • (Score: 0) by Anonymous Coward on Friday December 04 2015, @03:45PM

        by Anonymous Coward on Friday December 04 2015, @03:45PM (#271821)

        And that perfectly illustrates how distorted your perception of reality is. That whackadoodle is completely unknown to anyone outside his circle-jerk.

        • (Score: 2) by Runaway1956 on Friday December 04 2015, @04:04PM

          by Runaway1956 (2926) Subscriber Badge on Friday December 04 2015, @04:04PM (#271827) Journal

          And - how would YOU know? Are you the jerk in his circle?

          • (Score: 0) by Anonymous Coward on Friday December 04 2015, @04:36PM

            by Anonymous Coward on Friday December 04 2015, @04:36PM (#271842)

            > And - how would YOU know? Are you the jerk in his circle?

            Because your constant jerking off here has splattered on all of us at one point or another.

            • (Score: 2) by zugedneb on Friday December 04 2015, @04:49PM

              by zugedneb (4556) on Friday December 04 2015, @04:49PM (#271849)

              and what have you contributed with?

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              • (Score: 1, Touché) by Anonymous Coward on Friday December 04 2015, @05:20PM

                by Anonymous Coward on Friday December 04 2015, @05:20PM (#271861)

                Surely you've noticed that username Anonymous Coward is the most prolific poster on the site.

  • (Score: 0) by Anonymous Coward on Saturday December 05 2015, @11:17AM

    by Anonymous Coward on Saturday December 05 2015, @11:17AM (#272144)

    and participating in policy debates

    Double-speak for "lobbying" and influence peddling.