Earlier this week, Mark Zuckerberg made the surprise announcement that he, along with his wife Priscilla Chan, would be donating 99 percent of their Facebook shares — worth around $45 billion — to the causes of “advancing human potential” and “promoting equality.” The gesture appeared altruistic, but some have criticized the way Zuckerberg is using the money, giving it to a limited liability company rather than a charitable foundation. Now Zuckerberg has responded to those complaints, posting another message that attempts to explain why he set up the Chan Zuckerberg Initiative, and what he and his wife want to do with the money.
“The Chan Zuckerberg Initiative is structured as an LLC rather than a traditional foundation,” he writes. “This enables us to pursue our mission by funding non-profit organizations, making private investments and participating in policy debates.” Unlike limited liability companies, charitable foundations are restricted from investing in for-profit businesses and cannot engage in political lobbying, activities that the Facebook founder said the Chan Zuckerberg Initiative was designed to do in order to further the development of humanity.
“Charitable foundations can’t lobby politically or invest in for-profit companies”
Others have suggested that the Initiative is a giant tax avoidance scheme, specifying that by gifting shares rather than cash, Zuckerberg avoids paying higher costs in capital gains tax. He addressed this concern too, stating that “by using an LLC instead of a traditional foundation, we receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative, but we gain flexibility to execute our mission more effectively.” Zuckerberg said that if his intentions were to avoid tax, he could’ve simply set up a charity. “If we transferred our shares to a traditional foundation,” he wrote, “then we would have received an immediate tax benefit, but by using an LLC we do not. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.”
Tougher to address was criticism that Zuckerberg was being wasteful with the money — specifically, that Facebook’s billions would be used to further his own Silicon Valley-shaped worldview rather than donated to a charity that already has operations in place in the developing world. At the moment of its foundation, The Chan Zuckerberg Initiative’s intentions were woolly — advancing humanity and promoting equality without a specific roadmap for either goal — but they’re already starting to take shape. Zuckerberg used his most recent post to call out initial areas of focus for the Initiative, choosing “personalized learning, curing disease, connecting people, and building strong communities” as places it will first spend its money.
These four areas are again broad, but Zuckerberg picked out specific examples of where he has spent money before, listing accomplishments. “Our education work has been funded through a non-profit organization, Startup:Education, the recently announced Breakthrough Energy Coalition will make private investments in clean energy, and we also fund public government efforts, like the CDC Ebola response and San Francisco General Hospital.” Again justifying the decision to use an LLC rather than a charitable foundation, Zuckerberg said “what’s most important to us is the flexibility to give to the organizations that will do the best work — regardless of how they’re structured.”