Zuckerberg Threatened to Leave California Over Billionaire Tax, Meta Filing Reveals

Meta CEO Mark Zuckerberg engaged in extensive discussions with the company's board regarding a potential move out of California if the state were to pass Proposition 40, a proposed 5% wealth tax on billionaires. The revelations came in a new financial filing by the tech giant, which indicated that such a tax could compel Zuckerberg to sell significant portions of his stock.

According to a filing submitted to the Securities and Exchange Commission, Zuckerberg expressed concerns that the wealth tax, which could amount to an estimated $12.5 billion on his net worth of approximately $250 billion, would necessitate selling off large amounts of his Meta stock. This, in turn, could dilute his voting power in the company he founded.

Meta stated in the filing that Zuckerberg's wealth is primarily derived from his roughly 13% ownership stake in the company, which includes specialized Class B shares granting him majority voting control. He has drawn an annual salary of $1 since 2013. Zuckerberg indicated that if compelled to pay the wealth tax by selling his Class B shares, his voting interest could decrease to approximately 53%.

Discussions surrounding Proposition 40 reportedly intensified in July, with Zuckerberg repeatedly voicing his concerns to board members, including lead independent director Robert M. Kimmitt. Zuckerberg stated that the tax would impact his ability to remain a California resident and pay any assessed taxes.

Zuckerberg's legal team sent a letter on August 3 to a special committee of the board, requesting a revised compensation agreement. This agreement would aim to increase his liquidity in the event of a substantial tax liability. Zuckerberg indicated his intention to list his $110 million Palo Alto compound for sale by mid-September to establish residency elsewhere before the November 3 election, and he advised directors that he did not want prolonged negotiations, especially if the wealth tax were to expand to other jurisdictions.

"Mr. Zuckerberg stated his intention to remain with the Company for the foreseeable future but noted that, given the impending vote on California Proposition 40 and his personal circumstances, he would need to begin taking steps by mid-September in order to establish residency outside California by mid-October," the filing read.

The company detailed a recapitalization and dividend plan designed to ensure Zuckerberg's continued leadership at its Menlo Park headquarters, which involves the issuance of new Class C shares.

Meta's filing also noted that Zuckerberg has agreed to remain a California resident "or any other jurisdiction in which the Company maintains its corporate headquarters, absent material unforeseen circumstances rendering it prudent or advisable for him to reside elsewhere."

The disclosures were made alongside Meta's second-quarter earnings report, which showed a 26% increase in annual revenue. Meta did not immediately respond to a request for comment.

Zuckerberg is not the only billionaire to express opposition to California's wealth tax proposal. Sergey Brin, a co-founder of Google, relocated his residency to Nevada and has reportedly contributed significant funds to efforts opposing the tax. Former Google CEO Eric Schmidt and cryptocurrency mogul Chris Larsen have also made substantial financial contributions to initiatives against the proposed tax.