How Charitable Is Zuckerberg's Plan Really?

Editor’s Note: This article previously appeared in a different format as part of The Atlantic’s Notes section, retired in 2021.

Fortune’s Mathew Ingram complicates the Zuckerberg storyline relayed by Adam yesterday:

As BuzzFeed and others have pointed out, the charitable foundation Zuckerberg and Chan have set up is a limited-liability corporation, not a charitable trust. Some in the tech and media community have criticized this as making the announcement less obviously charitable, but others note that it will enable the Facebook co-founder to do things that charitable trusts are not allowed to do. That flexibility could make the foundation more effective, although it could also benefit the Zuckerberg family more than a traditional trust.

The Daily Beast’s Michael Maiello scrutinizes the news further:

Maybe the biggest benefit for Zuckerberg, or any CEO who donates stock to a family foundation: He will transfer ownership of his Facebook stock without paying capital gains taxes.

Though not mentioned by [finance professor David] Yermack, Zuckerberg will also benefit from the possibility that his foundation will live beyond him, with his heirs and their heirs at the helm, untouched by estate taxes.

There’s an almost overnight financial benefit, too: The Facebook founder will deduct the fair value of his gift to his foundation from his taxable income in the year he makes the donation. A donor like Zuckerberg could realize a tax benefit equal to about one-third of the value of his gift. In this case, he stands to benefit as much as $333 million, based on the $1 billion he plans as his first transfer.

For more perspective on Zuckerberg’s philanthropic efforts, Andrew Simmons recently reviewed The Prize for us, a book about Zuckerberg’s generous but mismanaged effort to revive Newark Public Schools. Slate’s Jordan Weissman is “sort of optimistic” Zuckerberg won’t misfire this time around.

Update: This I never knew, via tech entrepreneur Anil Dash:

[The Newark gift] was revealed to have been explicitly managed by Sheryl Sandberg to be timed to offset the negative publicity surrounding the release of the movie The Social Network. Given that track record, our default assumption should be that this [latest charity news] is a similar move, though obviously this announcement being coupled to the birth of their daughter makes such assumptions seem churlish or rude.

Gillian is currently writing a followup piece so I’ll update this note when it’s up. [Update: It’s up.] By the way, I just noticed that the 200-word writeup of Zuckerberg’s news that we posted at 5pm yesterday hit a Facebook reach about ten times the average reach of an Atlantic piece. The previous piece to hit that same level of reach was Graeme’s ISIS cover story in the wake of the Paris attacks. The third highest reach during this time period belonged to our small item on Facebook’s safety check.