Priscilla Chan and Mark Zuckerberg (Photo : Reuters/Mary F. Calvert)
Several media outlets' news reports have recently claimed that Facebook CEO Mark Zuckerberg and his wife Priscilla Chan have donated 99 percent ($45 billion) of their wealth to a charitable foundation they have created. However, the social network's co-founder is actually transferring his money to a limited liability company (LLC) that the Internal Revenue Service (IRS) does not technically classify as a charity.
Zuckerberg could still invest the LLC's funds into venture capital projects. The profits could in turn earn funds for his charitable Foundation.
Meanwhile, the transfer of funds also minimizes the amount of capital gains taxes owed, according to Irish Examiner. Zuckerberg-Chan checks written to various charities could help people while avoiding high federal taxes.
The move basically implies that Zuckerberg does not trust the federal government's use of tax revenue. Many tech giants are concerend about the power of corrupt politicians and influential lobbyists.
Today the Middle Class is basically disappearing in many developed countries. Irish Examiner points out that this has greatly been due to the ability of wealthy corporations and individuals to effectively use tax shelters.
However, some high-profile CEOs have announced they will donate a bulk of their fortune to charity. They include Microsoft's Bill Gates, and Berkshire Hathaway's Warren Buffet.
Gates admitted that when he left Microsoft a decade ago to focus on charitable work, he was "naive" about the difficulty of introducing new tech in countries without clean water and basic medical care. It will take another decade for his $1 billion in global health programs to produce results.
It is unlikely that tech giants such as Facebook will pay higher tax rates anytime soon, as last year it paid about $6,500 in corporate taxes in the United Kingdom. Another option is corporate donations to charities and foundations, as Facebook and Microsoft are doing.
The Zuckerberg-Chan $45 billion transfer of funds was to a private LLC company that they own, which will be subject to federal taxes on any earned income. However, what remains to be seen is if the Facebook CEO keeps his promise to spend almost all his personal wealth on altruistic causes, according to The New York Times.
Experts project that this year $350 billion will be donated to charities in the U.S.
