Thursday, December 3, 2015
NY Times Debate: Mark Zuckerberg's Use Of A LLC Rather Than A Foundation For His $45 Billion Charitable Giving
Following up on yesterday's post, The Tax (And Insider Trading) Benefits Of Mark Zuckerberg's Pledge To Donate 99% Of His Facebook Shares (Worth $45 Billion) To Charity: New York Times Room for Debate, Welcome or Wariness for Zuckerberg’s Legacy Plan?:
Facebook's founder pledged 99 percent of his stock to a corporation for charitable giving. But he'd avoid taxes on it, and he'd call the shots.
- Joseph Bankman (Stanford), Charitable Deductions Generate Giving
- Jack A. Blum (Tax Justice Network USA), Zuckerberg Is Setting a Bad Precedent
- Catherine Bracy (Code for America Relax), Philanthropists Do Good Work
- Josh Hoxie (Institute for Policy Studies), Zuckerberg’s Philanthropy Isn’t a Substitute for Taxation
Additional press and blogosphere coverage:
- Bloomberg, For Facebook’s Zuckerberg, Charity Is in Eye of Beholder
- Cassady Brewer (Georgia State), Nonprofit and Charitable Uses of LLCs
- Chronicle of Philanthropy, A Roundup of Views on the Zuckerberg Pledge
- Huffington Post, How Zuckerberg's LLC Could Be More Effective Than Charity
- Huffington Post, Mark Zuckerberg May Finally Be Doing Philanthropy The Right Way
- NBC News, Mark Zuckerberg's 'Initiative' Adds New Wrinkle to Tech Philanthropy
- NBC News, Mark Zuckerberg's Unusual Method of Charitable Giving
- New York Times, How Mark Zuckerberg’s Altruism Helps Himself
- New York Times, Mark Zuckerberg Defends Structure of His Philanthropic Outfit
- New York Times, Mark Zuckerberg Explains His Use of Limited Liability Company
- New York Times, Mark Zuckerberg’s Philanthropy Uses L.L.C. for More Control
- New York Times, Laurene Powell Jobs and Anonymous Giving in Silicon Valley
- New Yorker, Mark Zuckerberg and the Rise of Philanthrocapitalism
- Silicon Valley Business Journal, A Deeper Look Into the Structure of Zuckerberg's History-Making Charitable Pledge
- Tax Justice Blog, Memo to Mark Zuckerberg: Charity Begins At Home
- USA Today, Mark Zuckerberg Takes Unconventional Approach to Philanthropy
- Vox, Why Mark Zuckerberg's Huge New Donation Is Going to an LLC Rather Than a Charity
- Wall Street Journal, Mark Zuckerberg Tests New Philanthropic Model: By Creating an LLC Rather Than a Foundation, Facebook Founder and His Wife Can Support Their Goals While Sidestepping Some Rules
- Wall Street Journal op-ed, Ending Philanthropy as We Know It: The Charitable Donation by the Facebook Founder and His Wife Is Radical—And Not Just Because of the Amount, by Leslie Lenkowsky (Indiana)
https://taxprof.typepad.com/taxprof_blog/2015/12/ny-times-debate-mark-zuckerbergs-use-of-an-llc-rather-than-a-foundation-for-his-45-billion-charitable-giving.html
Mark Zuckerberg has announced he is setting up an LLC as a way to give away 99% of his fortune, which consists mainly of Facebook stock. I was puzzled by this at first, because doing it this way has no tax advantages. The LLC is a for-profit enterprise, so (a) he gets no deduction for giving away his stock, (b) if the LLC sells the stock, Zuckerberg pays the capital gains (it must be the basis is *not* stepped up to the time of donation, since that would be too good as a tax dodge), and (c) Zuckerberg needs to pay tax on the LLC income.
What I think is going on is that this is a personal accounting device, like having a separate bank account for charitable giving. The LLC will donate the stock to charities and never earn capital gains. The stock pays no dividends, so it has no income. And Zuckerberg is retaining enough stock that he can give away directly that he will hit the 50% limit on donation deductions each year anyway, so he can't use the stock donations for deductions in any case.
Anybody know if this is correct?
Posted by: Eric Rasmusen | Dec 3, 2015 6:57:51 PM