Mark Zuckerberg has reached an agreement with Meta to remain in California after raising the possibility of leaving the state amid concerns over a proposed billionaire wealth tax.
Zuckerberg, Meta's CEO, previously told the company he was considering moving his primary residence outside California because of Proposition 40, a ballot initiative that would impose a one-time tax equal to 5% of net worth on billionaires who were California residents on Jan. 1, 2026, if approved.
Under the agreement, Zuckerberg will receive non-voting shares that he could sell to help cover a potential wealth tax bill in exchange for a commitment to remain a resident of California, or the state where Meta maintains its headquarters, for eight years, according to Reuters.
Zuckerberg, the world's sixth-richest person with a net worth approaching $250 billion, according to Forbes, could face a substantial tax bill that might require him to sell company shares.
MARK RUFFALO CALLS GAVIN NEWSOM'S BILLIONAIRE TAX STANCE 'DISQUALIFYING' AHEAD OF CALIFORNIA VOTE
If passed by voters in November, the tax would be due in 2027, although payments could be spread over five years at an additional cost. Real estate, pensions and retirement accounts generally would be excluded from the tax.
Zuckerberg can immediately sell 20% of the Class C shares he receives, representing 10% of his overall economic stake in the company, potentially allowing him to pay the tax without giving up voting control, according to Reuters.
Meta said Wednesday that it planned to issue a new class of non-voting Class C common stock in January 2027 to help fund acquisitions and retain top talent while maintaining Zuckerberg's control of the company.
In a statement provided to FOX Business, Meta pointed to comments from Chief Financial Officer Susan Li, who said the new shares were designed to help the company raise capital, compensate employees and pursue acquisitions while preserving its existing voting structure.
REAGAN ECONOMIST WARNS BILLIONAIRE TAX WOULD ‘DESTROY’ CALIFORNIA
"We created this new class of shares with the purpose of creating a publicly traded non-voting stock usable for capital raising, employee compensation, acquisitions, other general corporate purposes while preserving the voting power of existing Class A and B shareholders," Li said during Meta's third-quarter earnings call.
Meta also said the decision followed a unanimous recommendation from a special committee of independent directors, which concluded that the new stock class would help finance the company's growth and preserve Zuckerberg's leadership.
According to a company filing, the committee emphasized the importance of Zuckerberg remaining in California to maintain close coordination with Meta's management and proximity to its Superintelligence Labs.
Although the ballot measure has been endorsed by the California Democratic Party, some prominent Democrats, including Gov. Gavin Newsom, have opposed it.
Economist Art Laffer, a former economic adviser to President Ronald Reagan, previously warned that the measure could accelerate an exodus of California's wealthiest residents.
META ORDERED TO PAY $25B AFTER JURY FINDS IT MISLED USERS ON DATA PRIVACY
"No one would want to go there to build their wealth only to be faced with this type of tax. It would cause an exodus of billionaires, which have not left California because the income taxes do not affect the billionaires much at all. This tax would really affect them," Laffer said.
California entrepreneur Eric Schiffer, chairman of the family office Patriarch and CEO of Reputation Management Consultants, previously told FOX Business that passage of the measure could prompt wealthy entrepreneurs to leave California.
"I think the impact of this passing in California is a giant sucking sound of all of these entrepreneurs being sucked out of California because they're just not going to want to stay," Schiffer said.
California's nonpartisan Legislative Analyst's Office (LAO) said "some billionaires" may decide to leave the state in response to the tax, potentially reducing the income tax revenue they generate.
The LAO also estimated that departures and other behavioral changes could reduce state income tax revenue by less than $1 billion annually. However, the office estimated that the wealth tax could generate tens of billions of dollars over several years.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
FOX Business' Arabella Bennett and Reuters contributed to this report.
https://www.foxbusiness.com/business-leaders/meta-agrees-let-mark-zuckerberg-remain-california-amid-proposed-billionaire-wealth-tax
