Meta has negotiated an arrangement with Mark Zuckerberg designed to shield him from potential liability under California's proposed wealth tax on billionaires. According to The Guardian, the company announced the deal on Wednesday night, stating it would enable its chief executive to remain a resident of California, where Meta's headquarters are based.
The structure centres on a two-for-one stock split that will create a new class of non-voting shares. This arrangement allows Zuckerberg to sell some of the new Class C shares to cover a potential tax bill without surrendering voting control of the company. Reuters reported that Zuckerberg can immediately sell 20% of the new Class C shares, equivalent to 10% of his overall economic stake, with the remaining shares becoming unrestricted gradually over eight years subject to conditions.
Zuckerberg, with a net worth of $239 billion according to Forbes, had indicated to Meta that he was considering relocating his primary residence because Proposition 40 could expose him to a multibillion-dollar tax liability. The measure, which California voters will decide on November 3, 2026, would impose a one-time 5% tax on approximately 250 billionaires living in the state. However, The New York Times noted that the proposed tax would apply to billionaires who lived in California on January 1, 2026, meaning relocating now would not avoid the levy if it passes.
Under the eight-year commitment Zuckerberg has made, he must remain a resident of California or wherever Meta maintains its headquarters. Meta said that without this arrangement, Zuckerberg's voting power could fall from approximately 60.6% to 53% if he had to sell existing shares to pay the tax.
What does the stock split accomplish?
The new Class C shares provide Zuckerberg with a mechanism to raise funds without diluting his control. Meta plans to issue the new Class C shares in January 2027. The company indicated that the structure could also serve other purposes, including funding acquisitions and retaining talent.
What is Proposition 40?
Proposition 40 represents a one-time wealth tax targeting the state's billionaire population. Recent polling has shown the measure remains short of majority support among voters. Tech billionaires have opposed the initiative, including Google co-founder Sergey Brin, Palantir co-founder Peter Thiel, and former Google CEO Eric Schmidt.
Rohit Khanna, the US congressman representing California's 17th congressional district, has framed the proposition as a fundamental choice about tax burden distribution. He stated:
Every society is taxed. The only question is who will pay. In Trump's America, working people pay more than they should, while billionaires are so unburdened that they are becoming trillionaires. In the America we seek, billionaires and trillionaires will pay their fair share, while working people will be unburdened.
How did Meta's financial performance compare?
Meta reported a 26% increase in revenues for the third quarter to $64.6 billion, surpassing analyst expectations of $63.3 billion. However, profits declined by 37% to $13 billion, affected by a $9.9 billion charge related to legal settlements. According to the Associated Press, Meta's third-quarter net income was $9.86 billion, up from $2.71 billion a year earlier, and the company forecast fourth-quarter revenue of $73 billion to $76 billion.
The profit decline was partly driven by an $18 billion settlement Meta reached with U.S. states in August over claims concerning teen mental health. This charge affected the company's quarterly results and reflects ongoing regulatory scrutiny of Meta's practices.
What legal challenges is Meta facing?
Beyond the wealth tax arrangement, Meta faces significant legal liabilities. A judge in New Mexico ruled on Wednesday that the company had misled the public about how it handled Facebook user data. This ruling adds to mounting legal pressures on the company, which has faced previous child safety fines and broader concerns about its data practices.
Meta also announced it had reduced its headcount to 66,775 at the end of September, representing a 15% decrease compared to a year earlier. This workforce reduction reflects the company's efforts to manage costs amid regulatory challenges and shifting business priorities.
What happens next?
California voters will decide Proposition 40 on November 3, 2026. If the measure passes, Meta's stock split arrangement would allow Zuckerberg to meet any resulting tax obligation without surrendering voting control. The company plans to implement the new Class C share structure in January 2027, positioning itself to execute the arrangement should the tax become law.
