Meta creates non-voting shares so Zuckerberg could pay California's billionaire tax

Meta has struck a deal with its chief executive, Mark Zuckerberg, that would let him pay a proposed California tax on billionaires without giving up control of the company. In exchange, Zuckerberg has committed to remain a resident of California for eight years.

The arrangement, disclosed in a filing on 21 October alongside Meta's third-quarter results, shows how founder-controlled companies can reshape their share structure around one person's tax position.

What the ballot measure would do

Californians vote on 3 November on Proposition 40, a one-off 5% tax on the assets of state residents worth more than $1bn. Supporters, including a large healthcare workers' union, say it would raise about $100bn, mostly for healthcare. More than $300m has been spent fighting it, and recent polls have shown it short of a clear majority.

Zuckerberg's fortune is put at well over $200bn, and based on that, his bill could be around $12bn, according to an estimate in the Los Angeles Times. Almost all his wealth is in Meta stock, and he takes a salary of $1 a year.

Why the share structure matters

Meta's stock comes in two kinds today. Ordinary Class A shares carry a single vote; Class B shares, held mostly by Zuckerberg, carry ten votes apiece. Zuckerberg owns about 13% of the company but, through his Class B holding, controls roughly 60% of the votes.

According to the filing, he told Meta that a large tax bill could force him to sell voting shares, cutting into that majority, and that he was considering moving his main residence out of California. In September he told the board he planned to put his Palo Alto home up for sale.

Meta's answer is a new class of non-voting Class C stock, issued to all shareholders through a two-for-one split and due to take effect in January. Zuckerberg will be able to sell or transfer up to 20% of the Class C shares he receives, for any reason, including to pay the tax, without reducing his voting control. Meta's filing said that if the tax passes, he would in effect be paying to serve as chief executive while living in California.

The company's case

A special committee of the board said Zuckerberg's leadership has been central to Meta's growth and that it did not want to put at risk his close work with Meta Superintelligence Labs, its AI unit. Meta told CNBC that many factors drove the decision and that it would be misleading to tie it to one.

Chief financial officer Susan Li told analysts the new shares would also serve for raising capital, employee pay and acquisitions, keeping the company founder-led while giving it more ways to fund AI spending. The filing says Zuckerberg made clear he would not support a large share issue that diluted his votes.

Shareholders reacted to the quarter as a whole, not just the tax deal: Meta's shares fell by more than 6% when trading opened the next day, as a sharp drop in profit and a wider sell-off in AI stocks weighed on the price. The commitment to stay has an exit: it applies unless material unforeseen circumstances make living elsewhere sensible.

Why European founders should care

Wealth taxes and exit taxes are a live issue in Europe too, from Norway, where a number of wealthy entrepreneurs have moved abroad in recent years, to debates in France, Spain and Switzerland. For founders whose wealth is locked in company shares, a tax on paper wealth can force sales that weaken control.

Meta's response shows one way a founder-controlled company can protect its leader, and it is a reminder that dual-class structures carry governance trade-offs for every other shareholder. The vote on Proposition 40 takes place today; if it passes, Meta's new share class will face its first real test early next year.