Mark Zuckerberg’s creative plan to pay California’s proposed billionaire tax without losing control of Meta

Key points

• Meta's board approved a new class of non-voting Class C stock, effective in January, to be used for capital raising, employee pay and acquisitions.
• The New York Times reported the plan also lets Mark Zuckerberg sell non-voting shares to pay California's proposed 5% billionaire tax without losing his roughly 60% voting control.
• Proposition 40 would impose a one-time 5% wealth tax on several hundred California billionaires, with backers saying it could raise as much as $100 billion over five years.

Meta's board has approved a new class of non-voting stock, called Class C common stock, the company said during its earnings call on Wednesday. The shares carry ownership but no vote on company decisions, and the class takes effect in January. Meta says it will use the stock for capital raising, employee pay and acquisitions, including its AI push, while keeping the voting structure that gives founder and CEO Mark Zuckerberg around 60% of the vote.

The New York Times has reported a further motive: helping Zuckerberg pay California's proposed billionaire tax if voters approve it. Because the new shares carry no votes, he could sell some to cover the tax without giving up control.

What the proposition would do

Proposition 40 was drafted by Berkeley tax law professors and is sponsored by SEIU United Healthcare Workers West, California's largest healthcare union. It would levy a one-time 5% wealth tax on the net worth of several hundred California billionaires who primarily live in the state. Backers say it could generate as much as $100 billion over five years, mostly for healthcare, with the rest for food assistance and education. Zuckerberg's potential bill has been estimated at as much as $11 billion.

Looks like billionaires will stay and figure out a way to pay the tax

— U.S. Representative Ro Khanna

Board pressure and the share plan

According to the Times, Zuckerberg told board members in September that if they could not reach an agreement, he would list his Palo Alto property for sale, potentially setting off a media firestorm. The stock plan emerged not long afterward, the paper reported. The reporting is partly based on a recent SEC filing that documents concerns about Proposition 40 and how they shaped the discussions.

The filing describes a one-time stock dividend giving shareholders one Class C share for each Class A or Class B share, a two-for-one split that Meta says will not change any shareholder's voting power. It states the dividend would let Zuckerberg immediately sell or transfer up to 20% of the Class C shares he receives, equal to 10% of his overall economic stake, including to pay his potential Proposition 40 tax liability without affecting his majority voting control. Meta referred TechCrunch to its earnings release, which said the special committee believed it was important for Zuckerberg to keep leading the company from California.