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Mark Zuckerberg’s Philanthropy Uses L.L.C. For More Control

• whatok 11y ago
  I don't blame him after what happened in New Jersey.
  • outside1234 11y ago
    What happened in New Jersey was that Mark was naive.
    • Nrsolis 11y ago
      Naive to think that the NJ teachers union would tolerate giving up even an inch of power to promote a public good? Where is the article lambasting the educators over the tremendous loss to the children of NJ because of a fight to control money they didn't earn?
    • DanielBMarkham 11y ago
      For those interested, here's a link (I looked it up): http://www.businessinsider.com/we-now-know-more-about-how-newark-schools-partially-squandered-mark-zuckerburgs-100-million-donation-2015-10 http://www.businessinsider.com/we-now-know-more-about-how-ne...
      • lacksconfidence 11y ago
        Any accounts of what happened? This used a whole lot of words to say almost nothing. It basically says it didn't work, but didn't go into any details of why beyond a high level complaint about beurocracy
      • deleted 11y ago
        [deleted]
  • jpkeisala 11y ago
    Actually, what happened?
  • exhilaration 11y ago
    What exactly happened? From what I hear the money wasn't misused, it just didn't fix things.
    • lagudragu 11y ago
      In short: Through the Oprah show, Mark donated 100 Million USD to the Newarks Schools to improve education. The end result, however, was the opposite. The students ended up being in a worse position due to corruption and mismanagement within Newarks' Schools abusing the capital injection.
• amalag 11y ago
  By putting money in the LLC he can avoid estate taxes and still give his family control if he wants. >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. >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. From: http://says.com/my/news/what-no-one-is-telling-you-about-mark-zuckerberg-donating-99-of-his-fortune-to-charity http://says.com/my/news/what-no-one-is-telling-you-about-mar...
  • Nrsolis 11y ago
    I don't see how this is a problem. He's following the law and organizing his affairs to retain control of the money he earned. You aren't less of a citizen because you try to not pay more tax than you owe. The exemptions for certain types of income are put there because the legislature wants to promote certain activities as beneficial to the public good. Charitable Remainder Trusts are one of those things written into the law. Complain to your lawmakers if you think that's unfair. Seriously. does anyone reading this post think the government is a better steward of their income than they are? If you think so, then donate 100% of your income to the government and live on public assistance. That option is provided on the tax return you sign here in the USA.
    • littletimmy 11y ago
      This sort of mindset only works when rich people are not the ones making laws in the first place. The law is not independent of the rich - they can influence the laws they follow. That's why it is a problem.
      • vezzy-fnord 11y ago
        If that is the case, then in order to be consistent, one would have to celebrate subverting the tax laws made by the rich (even if done by one of them).
      • drzaiusapelord 11y ago
• jcsnv 11y ago
  Its sad to see how these comments are going focus on this being a tax dodge. He is doing SOMETHING with 99% of his money for the greater good.
  • amalag 11y ago
    Not necessarily. He has just moved it around. He is ANNOUNCING he will do something good. He could use all the money to bankroll candidates or invest in for-profit companies. Nothing has changed yet except that he can avoid estate taxes. He however has said he will do something "good".
    • loceng 11y ago
      Like Internet.org good?
    • jayess 11y ago
      As far as I understand, he wouldn't avoid estate taxes. Whoever dies last would still own the LLC as an asset and the estate is taxed on the value of that asset. With their combined estate tax exemption, about $10.5 million, any value over that would be taxed at 40%. Unless he remains true to his word and he expects to spend it all before he dies. The only "avoidance" of taxes happening here is during the initial transaction of transferring the Facebook shares to the LLC's ownership. Of course as the LLC sells shares that have gained value, the capital gain would be taxed, as would any dividends or growth from any other investments the LLC makes.
      • amalag 11y ago
        I don't want to be totally negative on Zuckerburg. Maybe he will do good with the money. However: An estate would not be taxed on the value of the LLC, the same way one he is not taxed on the value of his stock. It is taxed when sold. If he assigns family members as owners there would not be additional taxes when he passes away if the LLC's money continues to grow. >11. Limited Liability Company (LLC) and Family Limited Partnership (FLP) FLPs and LLCs let you reduce estate taxes by transferring assets like a family business, farm, real estate or stocks to your children now, and still keep some control. They can also protect the assets from future lawsuits and creditors. >Here's how they work. You and your spouse can set up an LLC or FLP and transfer assets to it. In exchange, you receive ownership interests. Though you have a fiduciary obligation to other owners, you control the LLC (as manager) or FLP (as general partner). You can give ownership interests to your children, which removes value from your taxable estate. These interests cannot be sold or transferred without your approval, and because there is no market for these interests, their value is often discounted. This lets you transfer the underlying assets to your children at a reduced value, without losing control. https://www.estateplanning.com/Understanding-Estate-Taxes/ https://www.estateplanning.com/Understanding-Estate-Taxes/
• 6stringmerc 11y ago
  Did anybody see the part in the letter to the daughter that went into detail as to why the family made the decision to structure the legacy into an LLC instead of a traditional charity or trust? No? Wonder why they left that part out.
• DanielBMarkham 11y ago
  I don't know Mark and can't comment on his essay or this article. I can, however, note that on at least 3 different occasions in the last year or so I've read a heartfelt essay on somebody making sacrifices for the common good -- only to later realize they were just setting up a tax dodge. I do not think these things are mutually exclusive. You can both work for the common good while trying to legally avoid paying taxes. Heck, I'd rather smart people actively and passionately manage their money for the greater good, especially people with a track record of doing great things. More power to them. But I can relate that as a reader, once I finally figured it out what was going on, I was very disappointed. It was not a pleasant experience.
  • cmacpher 11y ago
    what 3?
  • ceras 11y ago
    If you're trying to do as much good as possible for the world, and you don't think government taxes are used for much good, taking advantage of legal tax write-offs is really important to achieve your goal.
  • JoeAltmaier 11y ago
    Folks donating to the common good are well advised to do it in a way that minimizes taxes. They go together; no conflict at all.
• matt-attack 11y ago
  I thought it was impossible to donate money (in a tax deductible manner) if you the donor had any direct control of how the money was spent. This was supposed to prevent folks from, say, donating their money to a charity which then sends their own child to college.
  • refurb 11y ago
    My understanding is that you are correct. I'm assuming he setup the LLC in some way that he doesn't have direct control over the money. Or at least it appears that way.
  • driverdan 11y ago
    The LLC is a for-profit structure. He can do anything he wants with the money.
  • harryh 11y ago
    The act of giving money (or shares) to the LLC won't be tax deductible. If/when the LLC gives money (or shares) to a charity that will be tax deductible. If/when the LLC spends money (or shares) on something not classified as a charity that will not be tax deductible. If/when Zuck & his wife die and there is still money (or shares) in the LLC those assets will be subject to the estate tax.
  • dnautics 11y ago
    That's not entirely true. I run a 501(c)(3) and I can donate to it and deduct it from my income. But I also don't pay myself out of it (or anyone really), and I have to be careful not to make purchasing/leasing etc. deals with relatives (not a problem in my case). The issue is not control, but disbursement of funds. Giving is fine, its how you use it that is scrutinized. Think of it this way: let's say the nonprofit needs pens from office depot. I could also just as easily have paid out of pocket and not donated to the (c)(3) and claimed it as a business expense, with the same net effect and less paperwork
• eachro 11y ago
  Can we all just reserve judgement until Zuckerberg does something with the money? I'm hoping he'll be able to do something along the lines of what Bill Gates and the Gates Foundation have done/are doing.
  • wpietri 11y ago
    No, we can't and shouldn't. He made a public announcement of a major action while talking about the public consequences, so public critique is appropriate. When he actually does something with the money, I'm sure they'll talk about it, so we can talk about it again then.
• jayess 11y ago
  If anything, this transaction will actually result in more taxes being levied than if he had transferred it to a foundation. There still will be capital gains tax when the LLC sells Facebook shares. It will pay income tax on any dividends. Any investments it makes will similarly be treated. There will be no estate tax dodge. The LLC will be valued at the value of its assets at the death of the last spouse and estate tax will be levied at 40% on that value. Please, someone, tell me how this is a tax dodge.
  • adventured 11y ago
    There's no scenario under which this is a tax dodge. A charitable foundation would have been superior when it comes to limiting taxes. People ignorant of LLCs and the tax code are the only ones claiming this is a tax dodge, it's an easy smear because so few understand said tax code.
• mikeash 11y ago
  I don't think I've seen a single positive statement about Zuckerberg's foundation. It would have been 100% fully within his right to simply keep it all, or blow his fortune on snorting Fabergé eggs, or buying classic cars and crashing them. Instead, he's giving almost all of it away. He's choosing to retain control over how it's given away? Well so what! It's still way better than keeping it all. I am no fan of Facebook, but man, the amount of vitriol coming out about this move just astounds me. Giving away 99% of your wealth is apparently not commendable unless you do it just right. Meanwhile, how much are the commenters themselves giving away? Oh, somewhat less than 99%? Yeah.
  • hvalika 11y ago
    Thank you! People are blowing this whole LLC thing out of control. It really isn't a big deal deal at all. He probably went against the word of his tax advisors to use an LLC as opposed to a typical foundation. Just applaud the man for his efforts and stop turning this into a tax play -- it isn't. Not a very good one at least.
  • fweespeech 11y ago
    > I am no fan of Facebook, but man, the amount of vitriol coming out about this move just astounds me. Giving away 99% of your wealth is apparently not commendable unless you do it just right. Meanwhile, how much are the commenters themselves giving away? Oh, somewhat less than 99%? Yeah. I can put 99% of my wealth in a LLC and claim I'm giving it away. that doesn't make it true. If he was being honest and genuine, it would be in a charitable trust or a non-profit foundation. Unless by "give away" he means "invest in companies and/or political lobbying". [ Hint: Charitable Trusts would function like a LLC in many respects with the guarantee at the end that the money would flow to a charitable cause in the end. ]
    • andzt 11y ago
      As a correction to your assumption and other comments in this thread, charitable trusts (depending on the many ways you can set these up) do not guarantee ANY money will ever be given to charity. Most require a distribution, but many do not dictate how this distribution is to be used or put a limit on how much can be distributed (although large distributions may still incur taxes). It's often used as a way to pass on an inheritance to avoid or limit tax consequences.
• gotothrowaway 11y ago
  This is interesting only because Mark didn't address it head on from the start, but honestly it's not all that surprising. Private foundations have something called "expenditure responsibility" which makes giving funds to a taxable entity (a grant) tremendously annoying. Any misstep makes you liable to some massive surcharges, public scrutiny, and potentially major headaches. It's the antithesis to Mark's "move fast and break things" There's some argument he should push for a public charity instead. There, expenditure responsibility isn't expressly required, but you're still expected to see that the money you grant is used for our charitable purpose, and still subject to audit. I'm expecting them to write quite the essay in response. On it's face, I don't think people should fault this decision. I'm fully expecting a strong effort to use this money efficiently, which is no easy task with such a massive sum. Check out GiveWells recent post about trying to "give away" Dustin Moskiwitz and Cari Tuna's money - which I believe is an order of magnitude less in volume, but still very challenging.
• dragonwriter 11y ago
  This article has the issue completely wrong from the first sentence. LLC and corporations are both organizational structures; either an LLC or a corporation can be a regular, tax-exposed operation, or a tax-exempt non-profit under the tax code (including a tax-exempt charity under 501(c)(3)). The fact that the Chan Zuckerberg Initiative is an LLC does not distinguish it from a non-profit; the fact (if it is a fact, and I can't really see drawing a strong conclusion on that on the basis of an article that starts out from a premise that confuses organization structure with tax-exempt non-profit status -- but the other discussion in the article from other sources seems consistent with it being an LLC that is not intended as a tax-exempt non-profit) that it doesn't comply with any of the categories for tax exemption and hasn't applied for recognition as a tax-exempt non-profit would. Really, a non-tax-exempt entity (whether LLC, corporation, or any other organizational structure) makes sense to coordinate philanthropic activities if you want to have flexibility that a 501(c)(3) wouldn't have and, since the funds are all coming from you, you don't need the incentive to donors that the tax-deductibility of donations to a 501(c)(3) would provide. If its a disregarded entity for tax purposes (which it can be with a sole owner or, IIRC, co-owners who are a married couple who file jointly), then anything the LLC donates to a 501(c)(3) has the same effect on the taxpayers liability as if the taxpayer had donated directly to the 501(c)(3). The same person could even establish one or more 501(c)(3) entities -- again, of any organizational structure, including LLCs -- through which to which the non-exempt LLC would donate funds for purposes that are within the scope of what is permitted for a 501(c)(3).
• sethd 11y ago
  Good for them, why shouldn't they retain control over how their money is dispersed? A LLC also has the advantage of being structured by a custom operating agreement, that can allow the members to cover all kinds of different scenarios to insure their vision is executed they way they intend.
• known 11y ago
  I'll give $300 million for https://www.change.org/p/independent-nation-for-300-million-india-s-untouchables https://www.change.org/p/independent-nation-for-300-million-...