Meta creates nonvoting shares for tax

For residents of New York and New Jersey, the news may feel distant, but it highlights a growing trend in how wealthy executives manage state-level wealth taxes. The core change here is structural. Meta has approved a new type of stock that separates ownership from voting power. This move could allow its founder to pay a significant bill in California without stepping down from the helm.

The company announced on Wednesday that its board has authorized Class C common stock. These shares grant holders an economic stake in the firm but carry no vote on corporate decisions. The new class takes effect in January. Meta states it will use these shares for raising capital, compensating employees, and funding acquisitions, particularly in artificial intelligence. Crucially, the existing voting structure that favors Mark Zuckerberg remains intact. He currently controls roughly 60% of the voting power.

However, reporting from The New York Times suggests a more specific motive behind the timing. The new nonvoting shares are designed to help Zuckerberg cover the cost of California’s proposed billionaire tax. If voters approve the measure, known as Proposition 40, he could sell a portion of these new shares to pay the tax. Because the shares have no voting rights, he would not lose his grip on company decisions.

Proposition 40 was drafted by tax law professors at the University of California, Berkeley. It is sponsored by SEIU United Healthcare Workers West, the state’s largest healthcare union. The proposal imposes a one-time 5% wealth tax on the net worth of several hundred billionaires who primarily reside in California. Supporters argue the measure could raise up to $100 billion over five years. Most of that revenue would fund healthcare needs, with the remainder allocated to food assistance and education.

The strategy appears to have been a direct response to this threat. According to The Times, Zuckerberg pushed the board to find a solution to protect him from the tax. He reportedly told board members in September that if they could not agree on a plan, he would list his Palo Alto property for sale. This move was expected to generate significant media attention. Shortly after those discussions, the stock plan was finalized.

These details are supported by a recent SEC filing by Meta. The document notes that Zuckerberg discussed the billionaire tax with board members as early as July. The topic resurfaced in meetings and communications throughout August. The filing explains the mechanics of the new shares. Meta will issue one Class C share for every Class A or Class B share currently owned. This is described as a one-time stock dividend, effectively acting as a two-for-one stock split. The company asserts that this dividend will not alter the voting power of any shareholder.

The filing explicitly links the dividend to the potential tax liability. It states that the dividend will allow Zuckerberg to sell or transfer up to 20% of his newly received Class C shares. This amount represents 10% of his total economic stake in the company. He can do this for any reason, including paying the tax under Proposition 40, without affecting his majority voting control. Since the dividend is one-for-one, half of his post-dividend shares will be the nonvoting Class C type. Therefore, the 20% cap on Class C sales equals 10% of his overall stake.

Meta has also cited the need to keep its CEO in place. In a statement included in its earnings press release, the company noted that a special committee believed it was vital for Zuckerberg to continue leading from California. The release emphasized his proximity to management and Meta Superintelligence Labs. Estimates suggest Zuckerberg could owe as much as $11 billion under the proposed tax. Other tech leaders, including Google co-founder Sergey Brin, have campaigned against the measure, warning of capital flight. Yet, Meta’s move suggests executives have creative ways to remain in the state while managing the financial impact.

Democratic Representative Ro Khanna, a supporter of the tax, reacted to the news on social media. He wrote that billionaires will likely stay and find ways to pay the tax. He added that if Proposition 40 passes, healthcare for California’s children will be funded. The outcome of the vote remains a key open question for the state’s fiscal future.