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Meta has created a stock arrangement that could help founder and CEO Mark Zuckerberg cover a potential California wealth tax while preserving his voting control. The move also reinforces his commitment to remain in the state.

The disclosure appeared Wednesday alongside Meta’s third quarter earnings report. According to the company, the arrangement is a first among California’s mega cap technology companies.

Proposition 40, scheduled for Election Day on Nov. 3, would impose a 5% tax on California residents worth more than $1 billion. Zuckerberg, currently worth about $225 billion, is ranked as the world’s sixth richest person.

Zuckerberg and Nvidia CEO Jensen Huang are the only two of technology’s centibillionaire CEOs who still live in California. Several other prominent industry figures have established residences elsewhere.

“If the California wealth tax is enacted and Mr. Zuckerberg becomes liable for a tax payment, Mr. Zuckerberg would effectively be paying to serve as the Company’s chief executive officer while residing in California,” Meta’s filing said. It also cited his “salary of only $1 each year.”

Meta said Zuckerberg committed to remaining in California for eight years, “unless there are material unforeseen circumstances that would render it prudent or advisable for Mr. Zuckerberg to reside elsewhere.”

The company created a new class of nonvoting Class C common stock that will take effect in January. Zuckerberg will receive a portion of the new stock through a dividend.

He will be permitted to “immediately sell or transfer up to 20%” of the shares granted to him “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,” the filing said.

Meta cautioned against viewing the potential tax as the sole explanation for the arrangement. “There were many driving factors that led the board and special committee to approve the Class C shares, and it would be misleading to attribute it to any single reason,” the company told CNBC.

The technology industry has broadly opposed Proposition 40. Former Google CEO Eric Schmidt, Stripe CEO Patrick Collison, venture investor Peter Thiel and DoorDash CEO Tony Xu have spent money opposing the measure, according to media reports based on campaign filings.

Collison and Xu serve on Meta’s board of directors. Thiel left the board in 2022 after serving since 2005.

Google founders Larry Page and Sergey Brin moved out of California before the election and purchased luxury homes in Florida. Elon Musk and Michael Dell live in Texas, while Oracle founder Larry Ellison officially calls Florida home.

Brin told The New York Times in April that he fled the Soviet Union with his family in 1979. “I don’t want California to end up in the same place,” he said.

Huang has taken a different position. He recently told CBS Sunday Morning that paying the tax would be a “privilege,” and Forbes ranks him just behind Zuckerberg with a net worth of $185 billion.

Supporters of Proposition 40 include Sen. Bernie Sanders, I Vt., who has urged voters to approve the measure. Recent polling, however, suggests it may not secure the majority support required to become law.

A recent Citrin Politico poll found that 46% of respondents favor the proposal, while 43% oppose it. The narrow spread leaves the tax debate active as Election Day approaches.

Meta and a special committee view Zuckerberg as central to the company’s future and its artificial intelligence ambitions, according to the filing. The company also wants to preserve his close working relationship with Meta Superintelligence Labs, which is led by AI chief Alexandr Wang.

“The Special Committee believes that Mr. Zuckerberg’s talent and leadership have been crucial to our growth, strategy, and stability since our inception, and the Special Committee wants that to continue,” the filing said.

Meta considered issuing Class A common stock to raise funds. Zuckerberg made clear “that he would not support a significant equity financing that would have the effect of reducing his voting power in the Company.”

The company said the new stock structure would help it receive “critical equity capital without impacting Mr. Zuckerberg’s voting power and the unique and creative vision and exceptional management abilities which helped to deliver the long-term value as noted above.”

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.