My day job is running a handful of private foundations and advising clients on their charitable gifting. I do this through my company, harp-weaver LLC. So you can probably understand my piqued interest when I read about the Chan Zuckerberg Initiative LLC. I was intrigued by Chan’s and Zuckerberg’s choice of a limited liability company versus a private foundation, trust or any other “traditional” charitable gifting vehicle.
We all probably read about Chan’s and Zuckerberg’s commitment to giving away most of their wealth to charity – an estimated $46 billion (see their Giving Pledge letter and browse others’ at http://www.givingpledge.org). When they made the announcement following the creation of the LLC in November of 2015, many tax experts weighed in and many of my peers in philanthropy were a bit skeptical.
While owners of an LLC do not receive a charitable tax deduction when donating assets; tax is not a motivating factor at this level. Flexibility and control appear to be driving this vehicle decision. If you look at things like ownership, management, investments and intention of activities, an LLC provides a lot of flexibility versus a private foundation. For example, a private foundation may not hold a controlling interest in a business enterprise and there are prohibitions against “jeopardizing investments,” while an LLC can invest in virtually any legal investment. Also, a private foundation must be operated purely for charitable purposes whereas an LLC’s activities are unrestricted. Another big area of consideration is political and advocacy activities. A private foundation is basically completely prohibited from engaging in these types of activities whereas an LLC can make contributions within the boundaries of campaign finance laws.
The selection of a charitable gifting vehicle is mainly driven by “how” you are going to fulfill your charitable intentions. At this level of wealth, being so young and open to innovation, its no surprise Chan and Zuckerberg chose a mechanism that maximizes their options for how they fulfill their charitable commitment.
by TERESA RODGERS, IC Member since 2014, Philadelphia