Patagonia billionaire who gave up company skirts $700M tax hit
bloomberg.com
bloomberg.com
A better article that is more about the facts: https://www-nytimes-com.cdn.ampproject.org/c/s/www.nytimes.c...
[..]The Chouinards then donated the other 98 percent of Patagonia, its common shares, to a newly established nonprofit organization called the Holdfast Collective, which will now be the recipient of all the company’s profits and use the funds to combat climate change. Because the Holdfast Collective is a 501(c)(4), which allows it to make unlimited political contributions, the family received no tax benefit for its donation.
[..]
“There was a meaningful cost to them doing it, but it was a cost they were willing to bear to ensure that this company stays true to their principles,” said Dan Mosley, a partner at BDT & Co., a merchant bank that works with ultrawealthy individuals including Warren Buffett, and who helped Patagonia design the new structure. “And they didn’t get a charitable deduction for it. There is no tax benefit here whatsoever.”
[..]
“This family is a way outlier when you consider that most billionaires give only a tiny fraction of their net worth away every year,” said David Callahan, founder of the website Inside Philanthropy.
“Even those who have signed the Giving Pledge don’t give away that much, and tend to get richer every year,” Mr. Callahan added, referring to the commitment by hundreds of billionaires to give away the bulk of their fortunes.[..]
He once talked about discovering that he was in Forbes magazine which had described as a billionaire, something he said "Really, really pissed him off."
He's making it a non-profit effectively, so he's not going to be personally getting income, and therefore no tax.
That the family controls the non-profit is one thing, but they're not going to financially benefit from it in a significant way.
I mean, their airfare and hotels are going to be paid forever though ...
This is just taxes in a straight forward way: profit/income = tax, otherwise not. His kids aren't getting the assets, so no generational tax.
It's just straightforward as one should expect it to be for the most part.
.....except since they're not selling the company, they're also likewise not earning a net 2.3bln in income. Hence: ridiculous.
It's one of the most absurd articles to ever come out of Bloomberg, and in fact it's so bad that I'd instead rather see meaningful dialog about people with the means exerting long lasting influence beyond death. The tax argument presented here is entirely contrived.
I'd likewise prefer seeing a debate around whether a 501c4 is enough to achieve the stated goals around influencing climate change policy and whether the option of political contributions is worthwhile compared to a 501c3, for instance. Any discussion stemming from the current "skirts $700m in taxes" headline is bunk.
We take his word that it will be used for Climate Change.
If he takes $1MM to donate to Harvard to secure a seat for each his children/grandchildren, then that's legal. If he uses it to host parties for the wealthy to "raise awareness", then that's legal. If he uses it to setup hotels, flights, IT servers, consultants, etc, then that's all legal. If he runs for office and uses the money for his campaign, that's all legal.
Moreover, if he gets into office he can now accept donations to his foundation in order to influence policy/laws without much question.
...and for a myriad of other quasi-personal uses, it's basically untraceable as non-profits have low financial reporting requirements.
I am very skeptical of these personally owned family "Foundations".
> but look… he could’ve done bad thing
We have every reason to believe Yvon and co. will be handling this responsibly and no reason to believe they will not be.
This would definitely not be legal.
https://www.irs.gov/charities-non-profits/other-non-profits/...
Yeah, that's how it works. Where would the money come from to pay a tax on something given away? There is no profit, there is only loss.
Avoiding the $700M tax doesn't suddenly net them billions. The money is still gone from their family.
It was an altruistic move that was also done in a way that avoided taxes.
The transfer to the 2% trust passed through estate/gift taxation (apparently), but also skipped capital gains tax.
It's all within the scope of the rules, but this is clearly tax avoidance as well as whatever else.
Rather than an altruistic play, it was an attempt to avoid taxes and keep the company under control of the family. Seems like others use this channel too.
They avoided a ton of tax if they had sold the company or even passed it to their heirs.
Instead, they created a couple non-profits, special ones that can make unlimited political donations, then put their family in charge of the non-profits.
So while they don't retain ownership, they retain control and are able to direct the company's money to their own political causes, all while saving on a $700M tax bill.
I mean, that doesn't seem that "altruistic" to me?
HN seems to be the first to say "paying your taxes is the right thing to do for society".
But these guys get a pass when they avoid a $700M tax bill and get to continue to use their billions in wealth to influence politicians?
A. Sell the company for multiple billions, pay $700M+ in taxes, and end up with multiple billions
B. Keep the company (don't sell or donate) and have billions in assets
C. Donate the company and lose billions in assets
They were never considering option A, so the choice was between B and C. So their total tax evasion was negligible.
They had no tax obligation to avoid because they were never selling the company.
So they chose C, avoid taxes, keep the family in charge of the company.
Option B didn't and couldn't have had a massive tax burden. The $700M in the title is referring to option A.
The company only has ~$100M in profits to tax in the first place.
Non-paywall: https://archive.ph/ifEzF
https://www.irs.gov/charities-non-profits/charitable-organiz....
From what I understood, the reason people are supporting this move is not because he's giving up money but because he is ensuring that the company doesn't have stake holders that will push for profit above all else.. Because that could lead to bad outcomes for the environment.
So he gave the company to a non profit to run. Because itvs a... Non profit.
...they no longer possess billions in wealth. The other response to you got it right... you're not scoring 700M unless you have some tax bill on a 3B income to pay.
My whole point is that people keep saying "tax evasion" when what they really mean is "paying your taxes is the right thing to do for society", which are not the same thing. "Tax evasion" would be contriving some scheme to sell this company for profit and not paying the bill while keeping the profit. What happened here is a whole order of magnitude less offensive than that. (Not I think it should be possible, but then, taxing transfers of wealth doesn't make a lot of sense from first principles anyway...)
They will all whine about billionaires not paying their share and how we need to tax carbon to fix the planet.
But given the chance to make a 700m donation to the government of course he used a structure to avoid making that donation.
HN users often tend to see themselves reflected in the ultra-rich, so any criticism of the decisions of a billionaire tend to be treated as personal attacks.
I think it is very likely that this move was not entirely an altruistic act that just happened to have saved over a half a billion dollars in a tax break and generated a boatload of good will for the brand as some sort of unforeseen side effect.