You often see a headline like this in the news: “Tech company CEO donates money to charity to help the less fortunate.” The Chan Zuckerberg Initiative, founded by Facebook CEO Mark Zuckerberg and his wife Priscilla Chan in honor of the birth of their daughter, Max, was the subject of criticism from news outlets regarding its true purpose. In this case, the Chan Zuckerberg Initiative was structured as a limited liability company (LLC), which is subject to different rules and regulations than a charity. This raises the question: is the Chan Zuckerberg Initiative a charity or a company?
“We will give 99% of our Facebook shares—currently about $45 billion—during our lives to advance this mission. We know this is a small contribution compared to all the resources and talents of those already working on these issues. But we want to do what we can, working alongside many others,” Zuckerberg said in a blog post announcing the Chan Zuckerberg Initiative. According to the New York Times, Zuckerberg and his wife are going into “uncharted waters” with their $45 billion pledge, namely because it is not exactly clear where the money will go at the moment. “Our initial areas of focus will be personalized learning, curing disease, connecting people and building strong communities,” Zuckerberg said, but these areas are extremely broad, and specific organizations have yet to be named.
Zuckerberg’s choice to structure the effort under an LLC came under scrutiny by the legal community. “It’s definitely different from a charity,” said Gene Takagi, managing attorney at the San Francisco-based NEO law group, which advises nonprofits and tax-exempt organizations such as charities. “It’s not as transparent. It’s not subject to the same kinds of rules.” It is suggested that Zuckerberg structured his effort as an LLC because charities are limited in what they can do. For example, the IRS limits charities regarding action in the political arena, such as lobbying, whereas an LLC has more freedom in that regard.
“This gives Chan and Zuckerberg more flexibility in how the money they put into their initiative can be used,” said Melissa Berman, CEO of Rockefeller Philanthropy Advisers, a nonprofit organization. “Through their LLC, the couple can not only donate funds to charities, but also invest in companies, and do advocacy or policy work…they’ve created a vehicle that gives them multiple channels to help achieve their social goals.”
Despite not aligning himself with a political party (even showing disdain for voting at one point), Zuckerberg has been active in lobbying for several causes, including comprehensive immigration reform and tax reform. Zuckerberg himself admitted that his initiative will take time to reach its full potential. “It will take many years to fully develop this model. But it’s another example of how advancing human potential and promoting equality are tightly linked. If we want either, we must first build inclusive and healthy communities.”