Why didn't Facebook CEO Mark Zuckerberg just donate his billions to charity?
FACEBOOK CEO Mark Zuckerberg has refuted claims his new charitable endeavour is an elaborate scheme to avoid paying tax in the United States.
Mark Zuckerberg this week announced that he and his wife Priscilla Chan would donate 99 per cent of their Facebook shares – currently valued at a staggering $45 billion, some £30billion – to "advancing human potential" and "promoting equality."
The hugely successful couple, who recently welcomed their first child Max, will donate the majority of their wealth over the course of their lives.
On the surface, the generous gesture appeared to be the latest in a string of philanthropic endeavours kickstarted by successful technology entrepreneurs.
But critics have blasted 31-year-old Mr Zuckerberg for establishing his philanthropic project as a limited liability company rather than a charitable foundation.
Setting up the Chan Zuckerberg Initiative as a limited liability company – or LLC – allows the Zuckerberg couple a greater freedom to use their money as they please.
Microsoft founder Bill Gates with wife Melinda Gates, who started the Bill and Melinda Gates Foundat
Charitable foundations – like the Bill and Melinda Gates Foundation, another philanthropic project by a prominent technology entrepreneur – cannot invest in any for-profit businesses and are unable to engage in political lobbying under US law.
However – as an LLC – the Chan Zuckerberg Initiative will be able to turn a profit, invest in profitable firms and make donations to politicians.
Some critics also questioned whether there would be tax benefits to Mr Zuckerberg and Ms Chan donating their Facebook shares to an LLC instead of a charitable foundation.
Facebook co-founder Zuckerberg has been forced to defend his decision to establish the Chan Zuckerberg Initiative as an LLC.
In a post on his Facebook page, he wrote that "just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC."
"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," he added.
"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."
Mr Zuckerberg also addressed criticism that – unlike the Bill and Melinda Gates Foundation – his own Chan Zuckerberg Initiative is able to invest in profitable firms and political donations.
He posted: "This enables us to pursue our mission by funding nonprofit organisations, 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."
Writing on his Harvard University blog, Dr Philip Greenspun argues that the LLC could be an Estate Tax avoidance scheme for Mark Zuckerbeg and Priscilla Chan's first child, Max.
"Let’s suppose that Baby Max owns shares in this LL," he writes.
"If she acquires them today, before any Facebook stock or proceeds from selling Facebook stock are transferred in, she hasn’t received anything Why did Facebook CEO Mark Zuckerberg NOT simply donate billions to charity | Tech | Life & Style | Daily Express:
