From The Desk Of Herb Fineburg
At this time of the year, charitable giving is big news. As many of you know, certain network news organizations and newspapers mistakenly reported that Facebook’s Mark Zuckerberg donated $45 billion to charity. The next day in a follow up article The New York Times finally got it right when it reported: “Mark Zuckerberg did not donate $45 billion to charity. You may have heard that, but that was wrong. Here’s what happened instead: Mr. Zuckerberg created an investment vehicle.” The New York Times, How Zuckerberg’s Altruism Helps Himself, page B4. Mr. Zuckerberg merely set up a limited liability company or L.L.C. as an investment vehicle to hold his Facebook stock. The use of an L.L.C. is the most commonly used investment vehicle for holding securities and real estate. However, a previous article in The New York Times announcing The Chan Zuckerberg Initiative, an L.L.C. formed by Facebook’s Mark Zuckerberg and his wife Dr. Priscilla Chan, seemed to indicate that an L.L.C. was an original concept for charitable giving. The New York Times, Business Day section, B1, December 3, 2015. From a legal standpoint, the use of an L.L.C. is not newsworthy as an investment vehicle and was not being used as a charitable vehicle. What is of interest is that The Chan Zuckerberg Initiative L.L.C. is not going to be a non-profit or tax-exempt organization, commonly referred to as a 501(c)(3) organization. A contribution to a non-profit organization is tax deductible by the donor. However, Mr. Zuckerberg’s proposed $45 billion contribution to The Chan Zuckerberg Initiative will NOT be tax deductible and is not a charitable donation. On December 3, The New York Times reported that “They (the Zuckerbergs) pledge to give away $1 billion a year for the next three years.” Stated another way, there is no charitable gift yet, but rather a $3 billion pledge by the Zuckerbergs to make charitable gifts later from the stock held in their personal investment L.L.C. Under I.R.S. rules, the assets of a non-profit are required to be used only for charitable purposes and everything about a non-profit needs to be made available to the public through the I.R.S. However, The Chan Zuckerberg Initiative, is owned and controlled by the Zuckerbergs, who can do as they wish with no public reporting requirements. Although The Chan Zuckerberg Initiative reportedly intends to fund research and technologies to address the underlying causes of heart disease and cancer, it has no obligation to do so since it is not a non-profit. Nevertheless, the Zuckerbergs are to be admired for their philanthropic dispositions. L.L.C.s are also commonly used by experienced estate planning attorneys in estate planning. You can find out more about L.L.C.s by contacting us.
ABOUT HERB FINEBURG
Mr. Fineburg concentrates his practice in the areas of Business Law and Transactions, Mergers and Acquisitions, Estate planning, Estates and Trusts, and Tax Consulting. He is recognized as one of Philadelphia’s most respected business lawyers whose substantial knowledge of tax law provides clients with strategic and cost-saving benefits in connection with commercial transactions, taxation and wills, trusts and estates matters. Known for his ability to resolve complicated matters effectively, Mr. Fineburg has assisted businesses and individuals with the organization of their finances, business and real estate affairs, and the structure of their assets (i.e., in LLCs, partnerships, corporations, trusts or joint ownership). He has substantial expertise in the preparation of buy-sell agreements for co-owners who are family members or are unrelated business partners. In addition, to working on bank financings, business contracts and employment matters for his business clients, Mr. Fineburg also provides advice on business acquisitions and sales, and the resolution of shareholder and partner disputes and buy-outs.