Meta Creates Nonvoting Shares to Shield Zuckerberg From California Tax

Meta is creating a new class of stock that carries no voting rights, a move designed in part to help Mark Zuckerberg pay a proposed California tax on billionaires.

During Meta's earnings call on Wednesday, the company confirmed its board had signed off on what it is calling Class C common stock. Set to take effect in January, these shares will confer ownership stakes but grant no say in company decisions. Meta said the stock will serve multiple purposes: raising capital, paying employees, and funding acquisitions, including its costly push into artificial intelligence, all while preserving the existing voting structure that concentrates power in Zuckerberg's hands. He controls roughly 60% of the vote.

The New York Times reported there is another reason behind the new class. If California voters approve a proposed 'billionaire tax,' the nonvoting shares could give Zuckerberg a way to cover what he owes without surrendering voting control of the company he runs.

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

The Times reported that Zuckerberg asked Meta's board to devise a plan to protect him from the tax. According to the newspaper, he told board members in September that if no agreement could be reached, he would list his Palo Alto property for sale, a step that could have triggered a wave of negative press. Not long after, the stock plan appeared.

The Times account draws in part on a recent SEC filing Meta submitted. The filing documents the concerns surrounding Proposition 40 and how they shaped the talks that produced the new stock class. It states that Zuckerberg had raised the billionaire tax with board members as far back as July, and the subject resurfaced in further meetings and communications through that month and August.

The filing also spells out the mechanics of the plan. Meta will create Class C stock and distribute one share for each Class A or Class B share held. The company frames this as a one-time stock dividend, describing the result as a two-for-one stock split. The dividend 'will not change the voting power of any shareholder,' Meta says.

That is where Prop 40 enters the picture. The filing states the dividend 'will allow Mr. Zuckerberg to immediately sell or transfer up to 20% of the shares of Class C common stock that he receives in the Dividend, representing 10% of his overall economic stake in the Company, for any reason, including so that he may pay his potential tax liability under California Proposition 40, if enacted into law, without affecting his majority voting control.' Because the dividend is one-for-one, half of his post-dividend shares will be Class C, which places the 20% cap at 10% of his total economic stake.

Reached for comment, Meta pointed to a quote in its recent earnings press release that underscores another aim: keeping Zuckerberg in place. The quote reads: '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.' Estimates have put the tax bill Zuckerberg could owe at as much as $11 billion.

Prop 40 has drawn sharp criticism from prominent Silicon Valley figures. Google co-founder Sergey Brin has campaigned hard against the measure and spent heavily to defeat it. Other business leaders have echoed those concerns online, with many arguing the policy would amount to economic suicide for California and drive capital out of the state. As Meta's new plan suggests, however, the state's biggest companies and their leaders have found ways to work around the tax if it takes effect.

Democratic U.S. Representative Ro Khanna, a supporter of the tax, addressed the developments 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.