Notes
1 Mark Zuckerberg and Priscilla Chan, “A Letter to Our Daughter,” Facebook post, December 1, 2015.
2 Katie Benner, “Not Thinking Small for $3 Billion Investment,” New York Times, September 22, 2016.
3 Steve Lohr, “A Tech Talent Pipeline from Africa,” New York Times, October 11, 2017.
4 The Chan Zuckerberg Foundation predated CZI’s creation, and CZI uses it to make grants to public charities. Since its inception, CZI has transferred more than $1 billion to the Foundation, which has in turn reported grants to two public charities: $20 million to the Biohub project and approximately $1 million to The Primary School, an education and health-care nonprofit founded by Priscilla Chan. See Chan Zuckerberg Foundation Form 990-PF (2016).
5 Soon after CZI’s creation, Facebook’s board of directors approved a plan put forward by Zuckerberg to reclassify Facebook’s stock and create a new, nonvoting class. Shares of this class would be available for donation to CZI, while Zuckerberg would retain control over the company through his super-voting shares. See the plan’s announcement on Facebook by General Counsel Colin Stretch titled “Preserving Founder-Led Structure to Focus on the Long Term” (April 27, 2016). Shareholders sued, and the plan was ultimately abandoned. See Vice Chancellor J. Travis Laster, “Stipulation and Order Dismissing Action as Moot and Retaining Jurisdiction to Determine Plaintiffs’ Counsel’s Application for an Award of Attorneys’ Fees and Reimbursement of Expenses,” Delaware Court of Chancery, September 26, 2017.
6 In “Laurene Powell Jobs Goes Hollywood, Buys Minority Stake in ‘Spotlight’ Producer Anonymous Content” (Hollywood Reporter, September 30, 2016), Matthew Belloni reports that Emerson’s 2016 acquisition of “a significant minority stake in Anonymous Content, the production and management company behind the Oscarwinning film Spotlight,” sought to harness “the power of storytelling to shape our culture and improve lives.” See also Gillian B. White, “Emerson Collective Acquires Majority Stake in The Atlantic,” The Atlantic, July 28, 2017.
7 IRC § 4944(c).
8 Treasury Regulation § 54.4944-3(b).
9 Internal Revenue Service, Notice 2015-62, Investments Made for Charitable Purposes.
10 Darren Walker, “Unleashing the Power of Endowments: The Next Great Challenge for Philanthropy,” FordFoundation.org, April 5, 2017.
11 Uniform Prudent Management of Institutional Funds Act (UPMIFA) §§ 3(a), (e)(1)(H).
12 In “A Letter to Our Daughter,” Zuckerberg writes, “We must participate in policy and advocacy to shape debates. Many institutions are unwilling to do this, but progress must be supported by movements to be sustainable.” (Emphasis in original.)
13 See Treas. Reg. § 501(c)(4)-1(a)(2)(ii), which provides that an organization “may qualify [for exemption] under section 501(c)(4) even though it is an action organization.” (An “action organization” engages in substantial lobbying or any political campaign activity.)
14 See IRS Rev. Rul. 81-95. Business leagues exempt under § 501(c)(4) are subject to similar treatment. See Rev. Rul. 61-177, which states that an organization may be exempt under section 501(c)(6) “even though its sole activity is directed to the influencing of legislation which is germane to such common business interest.” Also see G.C.M. 34, 233 (December 3, 1969), which addresses political campaign activity by § 501(c)(6) business leagues.
15 I.R.C. § 4941(d)(1)(A).
16 I.R.C. § 4941(d)(1)(D) and (2)(E).
17 Marion Fremont-Smith, Governing Nonprofit Organizations, Cambridge, MA: Harvard University Press, 2004, pp. 195-197, 215-225.
18 The term was coined by Henry B. Hansmann in “Reforming Nonprofit Corporation Law,” University of Pennsylvania Law Review, 129, No. 3, 1981, pp. 497, 501.
19 Zuckerberg, “A Letter to Our Daughter,” supra note 1.
20 The Tax Policy Center, Model Estimates, “T18-0001—Impact on the Number of Itemizers of H.R.1, The Tax Cuts and Jobs Act (TCJA), By Expanded Cash Income Level, 2018.”
21 IRC § 170(b), (d), (e).
22 Not all LLCs elect to be governed by pass-through taxation, as this regime is commonly known, but they typically do so.
23 I.R.C. § 2001.
24 Wealth X, The World Ultra Wealth Report 2017, p. 1.
25 The most recent report of the National Philanthropic Trust, 2017 Donor-Advised Fund Report, reports this figure as the value of all assets under management by donor-advised funds at the end of 2016. As contributions to donor-advised funds have continued to grow strongly, as have most investment returns, the value today is almost sure to be considerably higher.
26 EY, EY Family Office Guide, 2016, p. 5. The guide describes the family office phenomenon and indicates that “at least 10,000 single family offices [are] in existence globally and at least half of these were set up in the last 15 years.”
27 Rob Reich, “On the Role of Foundations in Democracies,” in Rob Reich, Chiara Cordelli, and Lucy Bernholz, eds., Philanthropy in Democratic Societies: History, Institutions, Values, Chicago: University of Chicago Press, 2016, pp. 64-65; David Callahan, The Givers: Wealth, Power, and Philanthropy in a New Gilded Age, New York: Alfred A. Knopf, 2017.
28 For more information on philanthropy LLCs, see my forthcoming article “Disruptive Philanthropy,” Florida Law Review, 70, 2018.
