FACEBOOK CEO MARK Zuckerberg has said he will receive no tax benefit from donating billions to charities.
Zuckerberg and his wife, Priscilla Chan, created the Chan Zuckerberg Initiative following the birth of their daughter Maxima.
Over his lifetime, Zuckerberg plans to give away 99% of his Facebook shares, valued at the equivalent of €42 billion, to various initiatives.
However, he has moved to address criticism that this move could result in him paying less tax.
“The Chan Zuckerberg Initiative is structured as an LLC [Limited Liability Company] rather than a traditional foundation,” Zuckerberg explained. This structure behaves like a corporation.
As Bloomberg explained during the week, there are four main benefits to an LLC: There’s no limits on lobbying, it can turn a profit, it can get more involved with the private sector, and is not required to give away 5% of its value each year in donations.
Using an LLC will also give Zuckerberg more freedom over who they choose to fund.
“It will enable the creative and flexible use of capital over time,” Jacob Harold, chief executive of nonprofit database GuideStar, told The New York Times.
In a post today, Zuckerberg said:
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.
“It’s buying optionality, so that down the road they could still decide to direct money to nonprofits or they could choose to invest in really cool solar energy companies that are doing a lot of good.”
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 (€91.8m) to public schools in Newark, New Jersey, and pledged $120 million (€110m) to schools in poor communities of the San Francisco Bay Area.
They’ve also given $75 million (€68.9m) to the Zuckerberg San Francisco General Hospital, where Chan did her medical training.
Additional reporting by The Associated Press
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