The Internet blasted off this week when Facebook CEO Mark Zuckerberg and his wife, Priscilla Chan, published a letter to their newborn daughter, pledging to donate 99 percent of their Facebook shares (currently worth $45 billion) to charity.
In this letter to their daughter Max, the Mark and his wife open up their hearts at full stretch.
“The internet is so important that for every 10 people who gain internet access, about one person is lifted out of poverty and about one new job is created… If our generation connects them, we can lift hundreds of millions of people out of poverty. We can also help hundreds of millions of children get education and save millions of lives by helping people avoid disease.”
However, the philanthropy is structured not as a charity, but as a Limited Liability Corporation (LLC) with charitable aims. According to the Chan Zuckerberg Initiative’s, the LLC seeks to “advance human potential and promote equality”. But an LLC brings Zuckerberg certain tax exemptions. Many critics have raised the issue that the company structure could allow Zuckerberg to avoid paying tax on his sale of the shares.
By donating stock, Zuckerberg gets a charitable contribution deduction based on the fair market value of the shares, according to Forbes. In a pinned post on Facebook Mark mentioned that they wouldn’t get any tax benefit by transferring shares to the Chan Zuckerberg Initiative.
The share transfer instead yields “flexibility to execute our mission more effectively,” Zuckerberg wrote. “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,” he wrote. “And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.”
It doesn’t Matter whether one trust’s Mark Zuckerberg’s Philanthropy. The problems and the future that Mark and Chan have pointed in their letter is a Big Problem That We Even Need It.