How Mark Zuckerberg plans to handle a potential California wealth tax without losing power

For years, the structure of Meta’s leadership has been defined by a single individual holding decisive voting power. This arrangement, which gives Mark Zuckerberg control over roughly 60% of the company’s votes, has been a central feature of its corporate governance. However, a new development reveals how this structure is being adapted to respond to a specific fiscal threat in California.

On Wednesday, during its quarterly earnings call, Meta announced that its board of directors has approved the creation of a new class of shares. These are designated as Class C common stock. Unlike the existing shares, these new units grant the holder an ownership stake in the company’s value but carry no voting rights on corporate matters. The change is scheduled to take effect in January. Meta stated that the new stock class will be used for raising capital, compensating employees, and funding acquisitions, including its significant investments in artificial intelligence.

While the company framed the move as a standard financial tool, reporting from The New York Times suggests a more targeted purpose. The new shares are designed to help Zuckerberg pay for California’s proposed “billionaire tax” if voters approve it. Because the Class C shares do not influence votes, Zuckerberg could sell a portion of them to cover his tax bill without reducing his voting majority. This allows him to address the financial obligation while maintaining his current level of control over the company.

The tax in question is Proposition 40, a measure 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 would impose a one-time 5% tax on the net worth of hundreds of billionaires who primarily reside in California. Proponents argue the measure could generate up to $100 billion over five years, with the majority of funds directed toward healthcare, and the remainder supporting food assistance and education programs.

According to The Times, Zuckerberg has been actively pushing the board to find a solution to this potential liability. In September, he reportedly told board members that if they could not agree on a plan, he would consider listing his property in Palo Alto for sale, a move that could have sparked significant media attention. Shortly after these discussions, the plan for the new stock class emerged. The reporting relies partly on a recent filing with the Securities and Exchange Commission, which documents the concerns regarding Proposition 40 and how they influenced the decision to create the new share class.

The SEC filing indicates that discussions about the billionaire tax began as early as July, with further meetings and communications taking place throughout that month and August. The document outlines the mechanics of the new plan. Meta will issue a one-time stock dividend, giving shareholders one Class C share for every Class A or Class B share they currently own. This effectively acts as a two-for-one stock split. The company notes that this dividend will not alter the voting power of any existing shareholder.

Specific to Zuckerberg, the filing states that the dividend will allow him to immediately sell or transfer up to 20% of the Class C shares he receives. Since the dividend is one-for-one, half of his total shares after the split will be Class C. Therefore, selling 20% of those nonvoting shares represents 10% of his overall economic stake in the company. The filing explicitly mentions that this sale can be done for any reason, including paying a potential tax liability under Proposition 40, without affecting his majority voting control.

Meta responded to inquiries by pointing to a quote in its earnings press release. The company stated that its Special Committee believed it was important for Zuckerberg to continue leading the company from California. This was deemed crucial so he could remain in close coordination with management and in proximity to Meta Superintelligence Labs. Estimates suggest that Zuckerberg could owe as much as $11 billion under the proposed tax.

The proposal has stirred up considerable debate among Silicon Valley leaders. Google co-founder Sergey Brin has campaigned aggressively against the measure, spending significant funds to try to defeat it. Other business leaders have criticized the tax online, arguing it could drive capital out of the state. However, Meta’s strategy suggests that major tech companies have creative methods to handle the tax if it passes. Ro Khanna, a U.S. Representative and vocal supporter of the tax, reacted to the news on social media, noting that billionaires would likely stay and figure out a way to pay, adding that passing the measure would help provide healthcare for California’s children.