On Tuesday, Mark Zuckerberg announced not one, but two big life events. The first was the birth of Max, his daughter. The second was that he and his wife, Priscilla Chan, are establishing a new organization in the baby’s honor. “Like all parents, we want you to grow up in a world better than ours today,” Zuckerberg wrote in a note to Max on Facebook.
Making the world a better place is something that pretty much all humans can agree on, but backlash against the plan was swift. As journalists, thinkers, and analysts have opined about the Chan Zuckerberg Initiative, their largest criticisms of it stem from two things: the structure of the organization and the way it is being funded. In general, some concerns from early skeptics seem overwrought, or at least premature: Because of how Zuckerberg and Chan have gone about setting up their program, its fundamental goodness (or lack thereof) is entirely in their hands.
The capital used to fund and run the initiative will come from the gifting of nearly all of Zuckerberg’s Facebook stock, worth an estimated $45 billion—the bulk of his net worth. By funneling this stock into a new organization, critics say he’s trying to make tax evasion look like altruism. If Zuckerberg were to sell his stock at some point, he would have to pay capital gains tax on it, not to mention the taxes that would kick in should the money be passed down—and putting this stock into a new organization allows him to move the stock around without actually paying taxes on it.
Fair enough. But some claims about how much Zuckerberg stands to gain from this move in the near term are a bit dubious. Zuckerberg wasn’t selling the bulk of his stock immediately anyway. Also, because the Chan Zuckerberg Initiative has been structured as an LLC rather than a nonprofit, founding the organization won’t give Zuckerberg the charitable deductions that tend to come with charitable donations. The real question, then, is what will happen with the stock after it is transferred to the organization—it could be sold, or donated again. The Chan Zuckerberg Initiative could choose to simply gift the stock to charities, or donate to them with actual money. Those choices, and whether or not Zuckerberg seeks tax exemption, determine whether tax payments, deductions, and disclosure requirements will be triggered.