Meta's New No-Vote Shares Could Cover Zuckerberg's $11 Billion Tax Bill

Mark Zuckerberg has devised a way to meet a proposed state wealth tax without surrendering his grip on Meta. On Wednesday, the company said its board had approved a fresh category of shares, Class C common stock, that grants ownership but no voting rights. The class is set to take effect in January.

Meta framed the creation as a tool for raising capital, compensating employees and funding acquisitions, including its costly push into artificial intelligence, all while preserving the current voting structure that hands Zuckerberg roughly 60% of the vote. Yet reporting from the New York Times pointed to another motive: helping Zuckerberg cover a proposed California tax if voters approve it.

Proposition 40 would impose a one-time 5% wealth tax on the net worth of several hundred California billionaires who primarily reside in the state. The measure was drafted by Berkeley tax law professors and sponsored by SEIU United Healthcare Workers West, California's largest healthcare union. Backers project it could generate as much as $100 billion over five years, with most of that sum going to the state's healthcare needs and the remainder directed to food assistance and education.

The Times reported that Zuckerberg pressed Meta's board in September for a plan to shield him from the tax, telling board members that if they could not reach an agreement he would list his Palo Alto property for sale, potentially igniting a media firestorm. The stock plan emerged shortly afterward, the newspaper wrote. The reporting draws partly on a recent SEC filing by Meta that documents the concern surrounding Proposition 40 and how it informed discussions that led to the new stock class. The filing shows Zuckerberg had been talking about the billionaire tax with board members as far back as July, with the subject returning in further meetings and communications that month and through August.

The filing spells out how the arrangement would work. Meta is creating Class C, a nonvoting category, and will give shareholders one of them for every Class A or Class B share they hold. The company calls it a one-time stock dividend and says it should amount to a two-for-one stock split, adding that the dividend will not change the voting power of any shareholder. That is where Prop 40 enters the picture. The filing states that the dividend will allow Zuckerberg to sell or transfer up to 20% of the Class C shares he receives, representing 10% of his overall economic stake in the company, for any reason, including paying a potential tax liability under Proposition 40 if enacted into law, without affecting his majority voting control.

Meta referred questions to a quote in its earnings press release that restates part of the motivation for the stock's creation: "The Special Committee affirmed its belief that it was important for Mr. Zuckerberg to continue to lead the Company from California, including because it was crucial that Mr. Zuckerberg remains in close coordination with the Company's management and in close proximity to Meta Superintelligence Labs."

The proposed tax has drawn fierce opposition from many in Silicon Valley. Google co-founder Sergey Brin has campaigned against it and spent a small fortune trying to defeat it. Other business leaders and critics have argued online that the measure amounts to economic suicide for California and would drive capital out of the state. Prop 40's potential cost for Zuckerberg has been estimated at as much as $11 billion.

Democratic U.S. Representative Ro Khanna, who supports the tax, weighed in on X as news of Meta's approach spread: "Looks like billionaires will stay and figure out a way to pay the tax." He added, "If we pass Prop 40, poor California kids can have healthcare." The outcome now rests with voters, while Meta has signaled its plan is ready to proceed in January should the measure advance.