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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To mark the birth of their first child as well as "#GivingTuesday", Facebook's CEO Mark Zuckerberg and his wife Priscilla Chan have promised to give away 99% of their Facebook shares, currently worth about $45 billion, to charity over their lifetimes. MarketWatch notes a federal filing that indicates that Zuckerberg will donate about $1 billion per year over the next three years, but will retain his majority voting position in Facebook for the foreseeable future. From the letter:
Like all parents, we want you to grow up in a world better than ours today. While headlines often focus on what's wrong, in many ways the world is getting better. Health is improving. Poverty is shrinking. Knowledge is growing. People are connecting. Technological progress in every field means your life should be dramatically better than ours today. We will do our part to make this happen, not only because we love you, but also because we have a moral responsibility to all children in the next generation.
We believe all lives have equal value, and that includes the many more people who will live in future generations than live today. Our society has an obligation to invest now to improve the lives of all those coming into this world, not just those already here. But right now, we don't always collectively direct our resources at the biggest opportunities and problems your generation will face.
Consider disease. Today we spend about 50 times more as a society treating people who are sick than we invest in research so you won't get sick in the first place. Medicine has only been a real science for less than 100 years, and we've already seen complete cures for some diseases and good progress for others. As technology accelerates, we have a real shot at preventing, curing or managing all or most of the rest in the next 100 years.
Today, most people die from five things -- heart disease, cancer, stroke, neurodegenerative and infectious diseases -- and we can make faster progress on these and other problems. Once we recognize that your generation and your children's generation may not have to suffer from disease, we collectively have a responsibility to tilt our investments a bit more towards the future to make this reality. Your mother and I want to do our part.
Curing disease will take time. Over short periods of five or ten years, it may not seem like we're making much of a difference. But over the long term, seeds planted now will grow, and one day, you or your children will see what we can only imagine: a world without suffering from disease.
There are so many opportunities just like this. If society focuses more of its energy on these great challenges, we will leave your generation a much better world.
The letter goes on to mention other grand goals, global availability of Internet access, and the creation of the Chan Zuckerberg Initiative.
(Score: 5, Informative) by takyon on Friday December 04 2015, @02:47PM
rebuttal from the zuck [marketwatch.com]
FB post [facebook.com]
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 2, Insightful) by Anonymous Coward on Friday December 04 2015, @02:51PM
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
Oooh-hoo-hoo! More! More shinies!!!! Weeee!
--- Please remind me if I haven't been civil to you: I'm channeling MDC. ---Gaaark 2.0 ---
(Score: 0) by Anonymous Coward on Friday December 04 2015, @03:01PM
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
- 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
Put down the crack pipe and read the story.
(Score: 2) by frojack on Friday December 04 2015, @07:34PM
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.
No, you are mistaken. I've always had this sig.
(Score: 0) by Anonymous Coward on Saturday December 05 2015, @02:57AM
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
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.
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 0) by Anonymous Coward on Friday December 04 2015, @04:05PM
> 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
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..
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 0) by Anonymous Coward on Friday December 04 2015, @05:24PM
> 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
For me the big problem is that $45 billion ended up being invested in an over-hyped advertising company in the first place.
(Score: 2) by takyon on Friday December 04 2015, @06:51PM
It's the way of God's America. Where's your billion dollars?
🌠✝☠☢☣💰💰💰💃💉💊💋💎👌🗽💤
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(Score: -1, Redundant) by Anonymous Coward on Friday December 04 2015, @03:05PM
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
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
And I thank you for it... Please continue your good work
(Score: 1, Funny) by Anonymous Coward on Friday December 04 2015, @04:13PM
127.6.6.6 — home of the evil. ;-)
(Score: 3, Interesting) by kadal on Friday December 04 2015, @03:21PM
Vox had a similar explanation (http://www.vox.com/2015/12/2/9836884/zuckerberg-llc)
(Score: 2) by Runaway1956 on Friday December 04 2015, @03:33PM
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
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
And - how would YOU know? Are you the jerk in his circle?
(Score: 0) by Anonymous Coward on Friday December 04 2015, @04:36PM
> 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
and what have you contributed with?
old saying: "a troll is a window into the soul of humanity" + also: https://en.wikipedia.org/wiki/Operation_Ajax
(Score: 1, Touché) by Anonymous Coward on Friday December 04 2015, @05:20PM
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
Double-speak for "lobbying" and influence peddling.
(Score: 4, Insightful) by Non Sequor on Friday December 04 2015, @05:44PM
Note that it's not possible for the largest shareholder of a company to sell large volumes of shares quickly without tanking the share price. He can readily borrow large sums of money using his shares as collateral but that basically commits him to selling at some future point in time.
For him to give the full 99%*$45 billion to charity, he has to cash out slowly and Facebook has to continue to be perceived as an unstoppable social media juggernaut which will dominate the future of mankind. Facebook's stock price is largely based on the premise that it has not yet peaked in terms of users and profits per user. Maybe they'll peak this year, maybe it's going to be ten years from now, or maybe all of a sudden users start migrating somewhere else despite all predictions otherwise. A lot of people are apparently thinking Facebook is just going to keep going, but I'm not sure that I believe his wealth is secure enough to be making this grandiose of plans. Maybe five years from now he starts dropping that 99% to 95% because things aren't going so well. Maybe even later it drops to 80%. Maybe even later he's just your average small time billionaire rather than a superbillionaire and he starts feeling like he has to hold on to more.
Write your congressman. Tell him he sucks.
(Score: 1) by PocketSizeSUn on Saturday December 05 2015, @01:46AM
I agree to a point. I do think that starting a "charitable" LLC and widely publicizing it does shelter the worst of the effects of dumping stock (presumably a chunk roughly equivalent to the tax burden on each transfer will be dumped to the open market on of each transfer to the LLC, where as direct sales by the LLC will be understood and raising capital for the LLC (and would not generally shake shareholder confidence).
Of course there are still limits to the amount of stock he actually can divest before he looses control of FB, which is a separate issue entirely.
All in all this should allow Zuck to divest into the LLC at a fairly rapid pace (on the order of multiple millions per month). Also recall that he cashed out ~$1 billion on the IPO so large stock divestitures w/o the LLC intermediary explanation would certainly shake investor confidence and sharply driven the stock price lower.
Just my 2 cents.
(Score: 2) by JoeMerchant on Friday December 04 2015, @06:02PM
How incredibly stubborn and stupid would you have to be to create a disposal plan for $45Billion worth of capital without having the end result benefit you and your progeny? He's surrounded by people constantly advising him, unless he's allowed people who do not have his interests foremost into his inner circle (which would be an incredibly stupid thing to allow), they're all going to be presenting ideas that benefit him. If he doesn't listen to all of this valuable advice and goes off on a whim, that would be amazingly stubborn / capricious.
I'm impressed that he didn't choose one of the many available tax dodge routes. I'm sure he's still tax-advantaged in some ways, but calling it philanthropy without taking the NPC tax break is a pretty stand-up way to be rich, in my book.
🌻🌻 [google.com]
(Score: 1, Insightful) by Anonymous Coward on Friday December 04 2015, @06:15PM
Wow. You have a world-view that presumes that anything less than over-arching greed and self-interest is "stubborn and stupid." Starting from that premise pretty much guarantees a completely bonkers analysis.
(Score: 0) by Anonymous Coward on Friday December 04 2015, @11:59PM
No, he has a realistic world view and realizes that it is highly unlikely for someone to become a billionaire without being a greedy self-serving fuck. It's amazing how easily you're fooled by these "altruistic" antics.
(Score: 1, Insightful) by Anonymous Coward on Saturday December 05 2015, @12:27AM
> No, he has a realistic world view
Labeling actions that don't conform to that cynicism as "stupid" isn't just being realistic, it is endorsing that self-interest as morally correct.
(Score: 1) by kazzie on Friday December 04 2015, @06:33PM
"How Mark Zuckerberg's Autism Helps Himself"
Er, hang on...
(Score: 1) by Osamabobama on Friday December 04 2015, @08:29PM
Maybe I heard wrong, but that wouldn't make me wrong.
Appended to the end of comments you post. Max: 120 chars.
(Score: 0) by Anonymous Coward on Friday December 04 2015, @09:42PM
> Maybe I heard wrong, but that wouldn't make me wrong.
But your username does.