Meta’s Board Approves Nonvoting Shares Amid Push to Sidestep California’s Proposed Billionaire Tax

A proposed one-time 5% tax on the net worth of several hundred California billionaires has prompted Meta’s board to authorize a new class of nonvoting stock, a move that has raised questions about shielding its chief executive from the measure while retaining his authority. The company’s board approved Class C common stock during its earnings call on Wednesday. These shares confer ownership stakes but provide no voting power on company decisions, a structure set to take effect in January. Meta has stated the shares are intended for raising capital, funding employee pay, and financing acquisitions, including its expensive push into AI.

This sequence began months prior to Wednesday’s meeting, according to a recent SEC filing. As early as July, Zuckerberg was discussing the billionaire tax with board members, and the topic surfaced in further meetings and communications throughout that month and August. The filing details that as part of a plan to create the new share class, shareholders will receive one Class C share for every Class A or Class B share they own. This one-time dividend constitutes a two-for-one stock split that does not alter any shareholder's voting power.

That is where Prop 40 comes in. The filing says the dividend “will allow Mr. Zuckerberg to immediately sell or transfer up to 20% of the shares of Class C common stock that he receives in the Dividend, representing 10% of his overall economic stake in the Company, 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.” Because the dividend is one-for-one, half of his post-dividend shares will be Class C, so the 20% cap equals 10% of his total economic stake.

When reached for comment by TechCrunch, Meta referred us to a quote included in its recent earnings press release that reiterates that part of the motivation for the creation of the stock was to keep Zuckerberg onboard: “The Special Committee affirmed its belief that it was important for Mr. Zuckerberg to continue to lead the Company from California, including because it was crucial that Mr. Zuckerberg remains in close coordination with the Company's management and in close proximity to Meta Superintelligence Labs.”

It’s been estimated that Zuckerberg would have to pay as much as $11 billion as part of the tax.

Prop 40 has notably riled many of Silicon Valley’s most prominent businesspeople. Google co-founder Sergey Brin has aggressively campaigned against the measure, even spending a small fortune in an effort to defeat it. Other business leaders and critics of the proposal have criticized it online, with many claiming that it amounts to economic suicide for California, driving a capital flight from the state. However, as Meta’s new policy would appear to show, the state’s mega-companies and the people who run them have creative ways of dealing with the tax, should it materialize.

“Looks like billionaires will stay and figure out a way to pay the tax,” Democratic U.S. Representative Ro Khanna, a vocal proponent of the tax, wrote on X, after news of Meta’s strategy spread online. “If we pass Prop 40, poor California kids can have healthcare,” he added.