Facebook co-founder and CEO Mark Zuckerberg made headlines earlier this week when he posted an open letter to his newborn daughter that revealed he and his wife Priscilla Chan will be giving away 99 percent of their Facebook shares to charity.
Currently worth an estimated $45 billion, Zuckerberg revealed he and his wife will donate his shares to charity over the span on their lives and begin the Chan Zuckerberg Initiative to "advance human potential and promote equality for all children in the next generation."
While Zuckerberg may have good intentions with wanting to make the world a better place for his daughter, many have wondered whether such a huge donation has anything to do with Zuckerberg wanting to avoid to paying taxes on his fortune.
To respond to these critics, Zuckerberg revealed more details about the Chan Zuckerberg Initiative, and addressed the accusations that he's created a foundation as a means to evade taxes and make investments under the facade that he is doing good for society.
The Facebook CEO writes that the Chan Zuckerberg Initiative is structured as an LLC rather than a traditional foundation. In his post, it seems he implies that if he wanted to evade taxes, he would have structured it the other way around.
"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 writes in the post. "In fact, if we transferred our shares to a traditional foundation, 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."
However, because the initiative is an LLC, it still does have some benefits. The initiative has more control to spend the money how it wishes, instead of being required to spend 5 percent of the initiative's value every year like traditional charitable foundations have to. It also means it can fund nonprofit organizations, make private investments, use the money for political donations, and lobby for changes in the law.
"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," Zuckerberg writes.
He pointed out that the couple's education efforts have been funded through the nonprofit Startup:Education, and that he has also teamed up with Bill Gates and others to make investments in clean energy in the recently announced Breakthrough Energy Coalition.
The public will just have to trust that Zuckerberg is putting his money where his mouth is for the right reasons.
Photo: Andrew Feinberg | Flickr