Luxury tax or relocation — what Meta did to keep Zuckerberg in California
Kyiv • UNN
Zuckerberg committed to staying in California for eight years in exchange for non-voting shares. They will help pay a possible wealth tax.
Meta Platforms has reached an agreement with Mark Zuckerberg for him to continue living in California. This came after the CEO warned that he was considering leaving the state where the company is headquartered if voters next month support a proposal to introduce a wealth tax, UNN reports, citing Reuters.
Meta said on Wednesday that under the terms of the agreement, Zuckerberg will receive non-voting shares. He will be able to sell them to cover potential tax liabilities amounting to billions of dollars if the proposal is approved. In return, he undertakes to remain a resident of California (or of whichever state Meta's headquarters are located in at that time) for eight years.
Zuckerberg, who according to Forbes is the world's sixth-richest person, told Meta that he was considering changing his primary residence to somewhere outside California. The reason was "Proposition 40" — an initiative dubbed the "California wealth tax." It could create enormous tax liabilities for him, potentially forcing him to sell voting shares to pay them.
According to political analysts, it is not yet known whether "Proposition 40," which provides for the introduction of a one-time 5% tax on billionaires residing in the state, will be approved. About 250 billionaires live in California, with combined fortunes exceeding $2 trillion.
Zuckerberg, whose fortune is estimated at approximately $240 billion, will be able to immediately sell 20% of the Class C shares he receives (representing 10% of his total economic stake in the company). This will allow him to pay the potential tax without losing control through voting rights.
The company also announced on Wednesday that in January 2027 it will issue a new type of non-voting Class C common shares (effectively carrying out a two-for-one stock split). This is being done to finance acquisitions and retain leading specialists while preserving Zuckerberg's control over the company.
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According to the filings, Meta's long-term projections indicate a need to raise "hundreds of billions of dollars" over several years, starting as early as fall 2026. The company will need this capital to finance its artificial intelligence development plan. The parent company of Facebook and Instagram said that a special committee of its board of directors had concluded that it was of "critical importance" for Zuckerberg to remain in a leadership position and continue running the company from its headquarters in California — particularly amid what the company described as "unprecedented challenges and competition in our industry" driven by the development of artificial intelligence.