Meta creates nonvoting shares to help Zuckerberg with tax bill

Meta is changing how its shares work, and the company says it is tied to a proposed state tax. The social media giant announced Wednesday that it plans to issue a new class of nonvoting stock. The move would allow Mark Zuckerberg to sell shares to cover a potential tax bill without losing his control over the company.

The board has approved this new stock class, called Class C common stock. It is set to begin in January. Meta says it plans to use the stock to raise money, pay employees, and fund acquisitions, including its push into artificial intelligence. The company also says the plan will keep the current voting structure in place. Zuckerberg controls about 60% of the vote.

There is another reason for this plan. According to a report from the New York Times, the new stock is intended to help Zuckerberg pay for a proposed tax in California. This plan is connected to Proposition 40. If voters approve it, the measure would impose a one-time 5% wealth tax. The tax would apply to several hundred billionaires who live in the state. Supporters say it could raise up to $100 billion over five years.

The money from the tax would go to the state's healthcare needs. The rest would be used for food assistance and education. The proposal has drawn strong opposition from some in the tech world. Google co-founder Sergey Brin has campaigned against it. Some critics call the tax plan bad for California's economy.

The new stock plan is a way for Zuckerberg to handle the tax if it is passed. The new Class C shares would not give the holder any vote on company decisions. This means he could sell some of these shares to pay the tax. He could do this without giving up his voting control. He would not lose his power to make decisions for the company.

The company's plan would be to give shareholders one Class C share for each Class A or Class B share they own. This is a one-time stock dividend. Meta says this would result in a two-for-one stock split. The dividend would not change the voting power of any shareholder. The filing states that this would allow him to sell up to 20% of his Class C shares. This represents 10% of his total economic stake in the company.

The New York Times reports that the plan was created after Zuckerberg spoke with the board. He told board members in September that if they did not find a solution, he would list his home for sale. The stock plan was created shortly after that conversation.

It has been estimated that Zuckerberg would have to pay as much as $11 billion if the tax is enacted. After the news of Meta's strategy became public, Democratic U.S. Representative Ro Khanna commented on X. “Looks like billionaires will stay and figure out a way to pay the tax,” he wrote. “If we pass Prop 40, poor California kids can have healthcare,” he added.

The next step is for voters to decide on the tax. Proposition 40 is on the ballot for the state's election. If it passes, the state will begin to collect the one-time tax from eligible billionaires. Meta's new stock class is scheduled to start in January, which is before any tax would be paid.