MARK ZUCKERBERG'S CHARITABLE ANNOUNCEMENT EXPLAINED
Facebook CEO Mark Zuckerberg announced that he pledged 99% of his Facebook shares to charity. NOT 99% of his "wealth." And the structure he chose has a lot of people asking questions. Let's answer them, shall we? (Reporting by CNBC Wealth Editor Robert Frank)
- •Zuckerberg formed the "Chan Zuckerberg Initiative" - An LLCZuckerberg is pledging $45 Billion in Facebook shares to a new private LLC called the Chan Zuckerberg Initiative. This is not a non-profit Charitable Trust or Foundation. So, why an LLC?
- •Foundation vs LLC difference: DisclosureFoundations have to give away a certain amount of money every year and disclose their gifts and activities in public filings. The LLC can remain totally private.
- •Foundation vs LLC difference: InvestingNon-profits are restricted in how they can invest their money to make sure it's keeping with their charitable mission. Zuckerberg's LLC is free to invest in just about anything it wants and expects to earn profits on those investments.
- •Foundation vs LLC difference: LobbyingNon-profits are limited in the amount of money they can spend on lobbying, and they can't give to political campaigns. Zuck's LLC aims to "participate in policy" and "shape debates," according to the filing.
- •Foundation vs LLC difference: FlexibilityZuckerberg can change the amount he funds the LLC whenever he chooses. He announced $45 billion, but that can change at any time. When you give money to a Foundation, you can't get it back.
- •So why didn't Gates or Buffett and others form LLCs?You don't get the income tax deduction. But Zuckerberg's income is modest compared to his wealth, so he's willing to give up the small income tax benefit for more control and less disclosure. Zuckerberg's salary last year was $1.
- •Will this be the new model for philanthropy among the wealthy?Only time will tell, but it's certainly generating enough buzz that this will be eye-opening for anyone else in a similar position of wealth.