What No One Is Telling You About Mark Zuckerberg Donating 99% Of His Fortune To "Charity"
Published by Sadho Ram — 02 Dec 2015, 03:01 PM
It's neither exclusively a charity, nor his donation is going to a "charitable trust."
- Cover image via Money Sharma/AFP/Getty Images
By now you must have heard that Mark Zuckerberg along with his wife Priscilla Chan has pledged to give away 99% of his estimated USD45 billion in Facebook stock to charity. Basically, Mark is giving away enough money to fund one of the world's biggest charities for the next 45 years. Instead, he is funding his own. Here's how:
The vehicle for his beneficence will be the Chan Zuckerberg Initiative LLC, a family-run foundation that he controls and through which he will maintain control of Facebook for "the foreseeable future."
Which basically means:
Mark Zuckerberg will transfer ownership of his Facebook stock without paying capital gains taxes. He will also benefit from the possibility that his foundation will live beyond him, with his heirs and their heirs at the helm, untouched by estate taxes.
A Facebook PR, while confirming to BuzzFeed News, said that the initiative is structured as an LLC, and not as a charitable trust
Which means that unlike a charitable trust, which is compelled to spend its money on charity, Chan Zuckerberg Initiative, LLC will be able to spend its money on whatever it wants, including private, profit-generating investment.
While charity will certainly be one of the money's destinations, it will be far from the only one. The money, according to a Facebook SEC filing, will go to "philanthropic, public advocacy, and other activities for the public good."
One such activity: private investment. A Facebook release this afternoon stated as much.
"The Chan Zuckerberg Initiative will pursue its mission by funding non-profit organizations, making private investments and participating in policy debates, in each case with the goal of generating positive impact in areas of great need," it said. "Any profits from investments in companies will be used to fund additional work to advance the mission."
buzzfeed.com
One more thing about his pledge:
The Facebook founder is not giving away 99% of his Facebook shares all at once. He will be doing it over the course of the rest of his life.
Also, Michael Maiello points out in this Daily Beast piece:
Mark will deduct the fair value of his gift to his foundation from his taxable income in the year he makes the donation. A donor like Mark could realize a tax benefit equal to about one-third of the value of his gift. In this case, he stands to benefit as much as USD333 million, based on the USD1 billion he plans as his first transfer.
Rather than give to existing nonprofits, Mark is doing what other business leaders have recently done. Increasingly siphoning their fortune into their own organisations and this can be problematic.
Alexander C. Kaufman of The Huffington Post explains how:
The desire for control leaves the massive pool of money set aside for charities -- about $358 billion in the U.S. last year -- divvied between the roughly 1.5 million nonprofits registered in this country. Creating a new organization every time a company or wealthy individual wants to foster change only shrinks the available slices of that pie.
huffingtonpost.com
"Just because you were successful in the for-profit world doesn't mean that nonprofits are a bunch of bleeding-heart idiots that need you to come in and show them how it's done," Ken Berger, the managing director of the social-good data service Algorhythm, told The Huffington Post in October. He previously ran the nonprofit watchdog Charity Navigator. "We have one of the most complex and sophisticated nonprofit sectors ever seen. Partnering with others is the best approach."
That last part is key.
To sum up, his money is not going to a charity, but to his own LLC, which will let him evade tax by moving his private assets into a foundation. See, Zuckerberg doesn't need massive tax benefits to do whatever he wants. He can just do whatever he wants.
But he will get those tax benefits and estate planning benefits and he will be able to give up his stock while holding onto power over his company.
As Michael Maiello in his Daily Beast piece reveals, "when we pay people like Zuckerberg to fund their own foundations, we are really helping the rich and coddled few even as we thank and honor them for their charity."
Additionally, as Anil Dash writes in his Medium piece, it's necessary to be critical of Mark's philanthropic efforts, both past and present, to ensure that this pledge of USD45 billion is put to good use
That is because the default dispensation of the money will be to waste it.
For example, Zuckerberg donated $100 million to Newark schools to almost no effect, in a gift that was revealed to have been explicitly managed by Sheryl Sandberg to be timed to offset the negative publicity surrounding the release of the movie The Social Network.
Given that track record, our default assumption should be that this is a similar move, though obviously this announcement being coupled to the birth of their daughter makes such assumptions seem churlish or rude.medium.com
Mark made the announcement for the pledge on Facebook together with his wife Chan. They recently gave birth to their daughter Max.
While we are on the topic of charity, here's how a group of youngsters are doing a commendable job at it in Malaysia:
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Dear ALL
He is the youngest big donor at US$ 45 Bn.at the age of just 31.in fact, 31-40 is the golden age bracket when most people try to earn big money in life.Here, he is donating for new arrival of a girl child in his life.
World is full of Philantropists.
Dr.pradip desai
Ahmedabad,India
-----Original Message-----
From: join_mtc@googlegroups.com [mailto:join_mtc@googlegroups.com] On Behalf Of Prof. Bholanath Dutta
Sent: 03 December, 2015 8:01 AM
To: join_mtc
Subject: [MTC Global] [Real Hero] Zuckerberg's US$45B giveaway pledge stuns charity world
SAN FRANCISCO -- Facebook CEO Mark Zuckerberg is shaking up yet another sector -- the charity world -- with his surprise announcement that he and his wife will devote the bulk of their wealth, or about $45 billion, to philanthropic works.
The move will eventually put him and his wife, Priscilla Chan, in the same philanthropic echelon as Bill and Melinda Gates. It also involves a new type of philanthropic structure that differs from traditional foundations, although details on that remain scarce.
Zuckerberg made his pledge on Facebook in celebration of his daughter Max's birth.
The Zuckerbergs said Tuesday they will, over time, commit 99 per cent of their Facebook stockholdings to such causes as fighting disease, improving education and "building strong communities." The couple had previously pledged to give away at least half their assets during their lifetime, but hadn't provided specifics.
The announcement stunned the charity world. "It's incredibly impressive and an enormous commitment that really eclipses anything that we've seen in terms of size," said Phil Buchanan, president of the non-profit Center for Effective Philanthropy.
The new organization, called the Chan Zuckerberg Initiative, will pursue its initiatives through a combination of charitable donations, private investment and promotion of government-policy reform.
By comparison, the Bill and Melinda Gates Foundation has an endowment of just over $41 billion, which includes wealth donated by the Microsoft founder and his friend, the businessman Warren Buffett.
The new initiative will be organized as a limited liability company, however, rather than as a non-profit foundation. "They want the most flexibility and they are going to use a wide variety of activities to achieve their mission," Rachael Horwitz, a Facebook spokeswoman, said via email. "So in that way this is not a foundation nor is it entirely charitable."
The notion of investing money in companies that tackle social issues isn't new, but it has gained more currency among a younger generation of philanthropists, particularly in the tech world.
Zuckerberg has also shown a previous interest in influencing public policy. He led other prominent Silicon Valley figures in forming a group, FWD.us, that lobbied and gave donations to congressional candidates in an unsuccessful effort to promote immigration reforms. Depending on how much of the new effort is devoted to lobbying, it could raise new questions about the influence of money in today's politics, some experts said.
In the letter to their daughter, Zuckerberg and Chan described their goals as "advancing human potential and promoting equality." They added: "We must make long term investments over 25, 50 or even 100 years. The greatest challenges require very long time horizons and cannot be solved by short term thinking."
While Zuckerberg promised to release more details in the future, he said the couple will transfer most of their wealth to the initiative "during our lives." The couple will be in charge of the initiative, although Zuckerberg won't be quitting his day job.
"I have a full-time job running Facebook," he told The Associated Press in an interview last month, during which he discussed the couple's approach to philanthropy. Of his job at the social network, he added, "I'm going to be doing this for long time."
The Facebook co-founder is one of the world's wealthiest men. He and Chan, a 30-year-old pediatrician, have previously donated $100 million to public schools in Newark, New Jersey, and pledged $120 million to schools in poor communities of the San Francisco Bay Area. They've also given $75 million to the Zuckerberg San Francisco General Hospital, where Chan did her medical training.
In a statement, Facebook said the couple's plan to transfer their shares over time won't affect his status as controlling shareholder of the company. The company said Zuckerberg has committed to dispose of no more than $1 billion of Facebook stock every year for the next three years.
Zuckerberg and Chan had announced on Facebook last July that they were expecting a daughter, after Chan had three previous miscarriages. Horwitz said a 7-pound, 8-ounce baby was born early last week, but declined to say which day.
"Mom and baby are both healthy and doing well," Horwitz added. Zuckerberg has said he plans to take two months of paternity leave.
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