Musk’s $5.7B Mystery Gift Went to His Own Charity | Hacker News Reader

Musk’s $5.7B Mystery Gift Went to His Own Charity

bloomberg.com

251 pointsrpgbr325 comments

If I had money to donate I'd donate it to the charity I thought would be most effective at helping the cause I cared most about.

If I had enough money to create my own charity it would be focused on the cause I cared most about.

My giant ego and hubris would make it hard for me to come to the conclusion that a charity I created wasn't the most effective at its goals, even if that didn't happen to be the case.

This, I mean why created anything than the charity with most value in your personal view. This just signals he has faith in his own charity.

All true and a perfectly valid model.

But also try:

If I were incredibly wealthy and obsessed with running the score up, I’d see any taxes or other loss of wealth as a threat to my ego.

If my tax accountants came to me and said I could have a greater net worth by founding a charity optimized for my personal benefit, I’d happily shuffle money there rather than paying taxes.

I think that’s also a valid model. I don’t have enough info to have a strong opinion, but my priors on Musk make me at least question what he’s optimizing for.

I think he's probably optimizing for both. Don't hate the player, hate the game.

Por que no los dos?

Its not a feature, it is a bug. You don't have to hate either.

Anyone that wealthy has substantial influence over the design of the game itself.

Very true, but I think the dubious-donation game predates Musk by quite a bit.

I don’t see how a charity can be simultaneously optimized for benefiting its founder and also benefiting people other than its founder.

Different goals, different choices.

Unless you’re suggesting that Musk is such an egomaniac that he thinks the best thing a charity can do is help him personally?

One could argue that he wants the charity to be good just because of the "prestige" of having a top charity, and that would be helping personally I guess.

Not sure how putting money in a charity would make him more money even with tax breaks than just investing that money somewhere else, although I got no clue how charity tax breaks work in the US,

It goes like this:

I want to lower my tax liability by donating to charity > as long as I'm doing that I want to make sure I'm supporting something I agree with > I'll start my own charity to ensure that's the case.

Frankly I'm much more concerned about the billion dollar roth IRAs and 529 plans which seem to have a much lower chance of helping anyone else.

Roth IRAs aren't supposed to benefit anyone else. That's not why they exist

They're also not meant to hold billions of dollars (the annual contribution limit is like $6000). Yet somehow this happens [0].

[0]: http://www.propublica.org/article/lord-of-the-roths-how-tech...

yeah, I'm aware of that. They are designed with no cap, but clearly this type of growth was not expected.

Seems like it is an easy fix if it is determined to be a problem worth fixing. Just add a IRA cap at something like 50 million before you have to withdraw.

Or convert Roths back into regular IRAs after a point. I agree it's fixable and I think it ought to be fixed. I'm not so concerned about tax shenanigans that produce beneficial charity as a byproduct.

The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

Easy to see how a charity could line up with what Musk is interested in and/or his companies are doing.

Advancement of space travel, advancing rocket science, reducing rocket launch cost for government, communications connectivity for people, electric vehicles and batteries, self-driving cars, reducing government costs for tunnels and transport infrastructure, relief for conservatives who were distressed about being banned from Twitter, advancing the Gospel of Musk, etc.

EDIT: http://www.muskfoundation.org/ yep, looks about right.

If you're rich and gay, you might donate to a charity promoting LGBT equality. That benefits both you and other people.

I don't think there's anything wrong about this at all

Just that in this case the players are so powerful they can use their wealth to define the rules themselves.

“In a rich man's house there is no place to spit but his face.”

― Diogenes of Sinope

Or both. One can certainly despise a particular player playing a horrible game.

Ah of course, “the game”. Which part of the game do you play and succeed at? Do you also get to make the rules? If not, don’t simp for billionaires.

I'm playing the same game everyone else is and so far I've found moderate success. I have some small say in the rules, just like I hope you do and I agree that in a lot of cases the rules are completely whack.

Rather than "simping for billionaires" the intent of my comment was to cause the reader to introspect upon the part they play in crafting the rules and allowing the game to exist as it's currently played.

And you would be violating the law.

Not necessarily. Plenty of rich peoples’ charities are incredibly inefficient at their stated purpose, good for their owners, and legal.

Consider an imaginary tobacco tycoon’s charity that promotes cigarette use. It would be 100% legal.

Legal, but it would not qualify for 501c3 tax exempt status.

Honest question, what would make it illegal? Charities pushing for social change is 100% a thing and I don't think it's limited to such a vague concept as "positive" social change.

It's limited to charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

I guess you could argue promoting cigarette use is "educational" or perhaps "religious" if a cigarette-smoking cult existed a la The Leftovers, but I suspect it would be a hard sell in today's environment, given the scientific and social consensus on the dangers of smoking, especially if your day job is selling the things.

Maybe you could make it fly by using the funds to buy cigarettes and gift them to the homeless?

First, you can't actually "own" a 501c3, you can control it. Second, a 501c3 can be beneficial to its donors or controllers, but:

"The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction."

A charity that promotes peace on earth may be beneficial to the donors to the charity... but if "optimized for my personal benefit" it is likely to be non-tax-exempt... but I suppose we could debate the exact words used and what they really mean in theory. I think in the above tobacco scenario, the IRS and courts would likely find that the tobacco promotion was merely advertising, and therefore subject to taxation.

https://www.irs.gov/charities-non-profits/charitable-organiz...

Billionaire's 501(c)(3)s aren't charities in the typical sense. They're tax-exempt piles of money that are controlled exclusively by billionaire and their families (in this case Musk and his brother). The Musk Foundation in particular has donated less than 1% of the "charities" assets (most donations less than $500K, most years less than $1M) and these "charities" can pay out to their owners from tax-exempt gains on the back-end.

It is a super common tax avoidance scheme. It is legal. Pretending it has anything to do with good-cause charity isn't based in reality however.

PS - And to confuse matters further there are billionaires who are donating a lot to charity, like the Gates Foundation.

> Billionaire's 501(c)(3)s aren't charities in the typical sense. They're tax-exempt piles of money that are controlled exclusively by billionaire and their families

Ah, so basically the exact same as every other billionaire family's charity.

What's your point? Pointing out other billionaires doesn't make the billionaire we're discussing less horrible. Most billionaires are horrible in my opinion.

This is due to the idea that you cannot get that rich without exploiting people, taking money from government (while simultaneously talking against people receiving help), and this charity scheme is yet another loophole that needs to be closed.

While you may love/hate certain classes of people it would probably be helpful for you to refresh how economies work and, not just modern day economies, all economies. There will always be some level of exploitation in every single type of government/economy and there will always be government there to support interest of its people.

You might finesse your argument to the fact that you deem the level of exploitation and gains accrued to "billionaires" is too great for your tastes and that there needs to be a better balance struck.

If not it just reads as thoughtless criticism without understanding how are human systems work.

You’re standing up for the equality of billionaires? Sure, they’re a minority by definition, but I think we can all agree they’re not a disadvantaged class.

Standing up for billionaire? Nope. Pointing out that the complaint is poorly structured in how the world works with a goal is to help strengthen arguments and promote better conversation on here.

We'll never make the world perfect, but we can try and make it better. Less exploitation seems like a good thing to do. Don't you agree?

You’re saying that drawing a line at billionaire wealth doesn’t make sense. I don’t understand that logic, we draw lines for everything - why is this is such a messy limit according to you?

>This is due to the idea that you cannot get that rich without exploiting people, taking money from government (while simultaneously talking against people receiving help),

I'm ripping this part of OP commentary apart since it essentially describes everyone and not billionaires. It's a lazy argument.

My point is that the other billionaires are just as bad. The OP was framed in a way as though Musk was doing something novel, when it's the oldest trick in the book.

Right, billionaire family charities are almost uniformly horrible, including this one.

> and these "charities" can pay out to their owners from tax-exempt gains on the back-end.

I pretty certain that legally these charities can only give to causes that furthers their exempt purpose. [1]

E.g. a charity claiming to be devoted to saving children's lives in Africa can only spend money on exactly that, governance costs and fundraising.

The charity may be paying the owners as employees, and/or the owners may twist the spending to pretend it is in line with the purpose, but I don't think they can literally give the owners the tax-exempt gains.

1. https://www.irs.gov/charities-non-profits/charitable-organiz...

What's your take on these newer "economic development" 501c3's? Example: https://archgrants.org/

I've talked with the founder of Arch Grants, and I don't doubt their intentions are pure (there's others I'm more skeptical of), but either way it's difficult for me to wrap my head around the concept of a non profit that is by most metrics operating as a startup accelerator giving seed funding to for-profit businesses.

*Edit:grammur

Not taking any equity is a pretty important distinction.

Even if they did take equity, I'm not sure that would be a problem. Charities and non-profits can make investments. For example, foundations have huge market investments.

The distinction is that the owners can never cash out and put the money in their pocket.

At most, they can take a salary with justification.

If you can't cash out of equity it makes a deeply insecure situation for everyone involved. It basically becomes a weird way to perform stock buy backs and would almost certainly be immediately exploited

I dont think I understand what you are saying. Companies can already do stock buybacks with pretax money, and non-profits can already invest and hold equity.

I don't understand why a company would want to use a non-profit to buy back stock. The point of a buyback is to destroy the stock, driving up the price. If a non-profit holds the stock, then it doesnt work.

The company can invest. The charity owner itself certainly can't take equity using the charity's money.

But there's few restrictions on fundraising and administrations. So if the billionaire wants to throw a party, the charity throws the party. There's all sorts of shady bullshit billionaires do with their charities. So long as they turn in receipts and don't funnel the money directly into their pockets it's typically completely legal.

Plenty of normal folks go to parties to which they contributed via a 501c3. Go to the orchestra or the ballet to see it in action. This isn't billionaire-only stuff.

It does have something to do with good-cause charity if you believe Forbe's reporting. Before this they estimated he gave $280 million to charities which about 20% came from this DAF.

>> The Musk Foundation in particular has donated less than 1% of the "charities" assets

That is how almost all endowments work -- they give away their interest income or other income, not the principal, this way they can theoretically last forever. In the past, this was easier since you could earn 5% or 7% interest on a 1-yr Certificate of Deposit. Now, rates have been 0% so charities have to either dig into principal and risk their longevity or give out very little.

Oh but most people think how it works is you give away all your money and if you don't do that you aren't very charitable.

However the smart way to donate is keep principal alive and any money that money makes it goes to the charity therefore ensuring money in perpetuity. You bring up the challenge in the current environment.

"smart"? I'm not so sure. That assumes doing good deeds later (forever later really) is more valuable than doing them now/soon.

Id say being able to fund people to work on a problem over a long haul has a lot of value. Theres obvious short term needs and funding that is also important.

I guess it also depends on how that money is making money

>> "smart"? I'm not so sure. That assumes doing good deeds later (forever later really) is more valuable than doing them now/soon.

I can see both sides of the argument here. I think we can at least appreciate many instances of endowments. A great example might be universities...some of which have been around for hundreds of years c/o endowments.

It also allows individual programs and facilities to be funded forever so they do not need to fight yearly for budgets.

https://www.harvard.edu/about/endowment/

You have just enough information about foundations to completely misunderstand them.

It's true that a major reason for the popularity of foundations is legal tax avoidance: you can donate to a foundation in a year when you have lots of income, get the tax benefit in that year, and not have to make a charitable donation in the same year. The foundations is allowed to sit on most of the money for a long time. However, crucially, when the money leaves the foundation it must go to an approved charity. There have been some high-profile abuses of foundations, but that's simply illegal, the same way it would be illegal to not make a donation in the first place and claim a tax exemption.

I'm guessing there's more wealthy people getting away with breaking those rules or being extremely creative with them then not.

You are mistaken, it is very possible and legal to extract money from a 501(c)(3).

“If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.” https://www.irs.gov/charities-non-profits/charitable-organiz...

One example would be putting staff members up at a hotel you own.

I don't think it's clear how this contradicts the comment you're replying to.

“However, crucially, when the money leaves the foundation it must go to an approved charity.”

They can spend money on expenses and those expenses can benefit you. Having family members work for and be generously paid by such an orientation is a common example. Anytime you control a cash flow you can benefit from that cash flow.

yes, but that income will be fully taxed by the recipient (at whatever their tax rate is). The recipient isn't getting it tax free.

Not fully taxed, you have the next level of legal tax avoidance in the gap between company and person.

The key to getting low single digit % tax burdens is adding in steps that allow you to add lots of % reductions and obfuscations because more overt methods tend to not be sustainable and in some jurisdictions (as in the UK) csn lead to the method being retrospectively classed as tax evasion and you end up paying the outstanding balance with interest.

You avoid both income and gift taxes and they don’t pay taxes on benefits like health insurance so it’s a significant tax savings over just handing out money. More importantly is the social benefits as working at a charity is seen more positively than living on a trust fund.

Paying all your family members $200k a year until the end of time has a much lower tax liability than taking a billion dollars of income in one year.

I agree, but its also less valuable (money today is worth more than money tomorrow). It's a tax management strategy, I just don't find it "evil" and find the arguments that taxes aren't paid to be a bit false (less taxes in the end, but not no taxes, so perhaps my phrasing of "fully taxed" is also a bit off, not fully taxed at the level of the giver). The only way to get around it would be to hurt charities in general (which perhaps the more socialist amongst us would have zero problem with, but I personally think would be bad for society).

> Anytime you control a cash flow you can benefit from that cash flow.

Interesting point. One wonders if, hypothetically, I had $1B to donate to a charity, what those charities might offer up (under the table?) to be a recipient of that money.

I know, crazy conspiracy thinking.

Usually that's enough to get your name on a wing of a hospital or twenty

It's not unreasonable for a family member to want to spend their days working at a charity, using the family funds and time for good. But then it gets spun as nepotism by haters.

Because it is nepotism. They're drawing a salary, not volunteering to "do good". Why were they qualified for that position? It's obviously because they're a family member.

So you want to ban family businesses? Grandma needs to interview for her job making perogies? The daughter needs to do a coding test to prove that she's qualified run the cashier over other candidates?

Is the company public or organization give charitable stats? If so that puts a different spin on things.

If you don’t want any strings, then don’t ask for a handout from the taxpayers.

> If you don’t want any strings, then don’t ask for a handout from the taxpayers.

Of course, being tax-exempt is the opposite of a handout from the taxpayers: it’s exemption by the taxtaker.

Earnings are taxed when you make them. You need to have made money to donate it. QED, you earn, get taxed, get a handout.

Who's talking about banning anything? Were you under the impression that nepotism is a crime?

if they got that job because they are family it's literally nepotism.

IT is nepotism, but I think people have the mistaken idea that nepotism is unethical in all situations. It isn't necessarily corrupt or illegal.

Any salary paid by the organization would be taxable income for the recipient, closing the loop.

Also, you dont need the pretext of non-profit to do this. There are plenty of ways to simply pay family a pre-tax salary and deduct the cost against your income.

You can do this with any corporation and dont need to do it through a charity.

The point is you can recuperate some money after donating it.

The optimal approach is roughly donating appreciated assets such as stock so you not only get to avoid paying taxes on the sale but also reduce your income taxes elsewhere by the full amount. Aka if a stock is nominally worth 10 million but you would only get 9 million after tax if you sell it you still get to deduct the full 10 million from income taxes. Which beats the obvious idea of using a corporation to directly pay them.

For the full tax implications you need to consider the benefits of avoiding income tax and gift/inheritance tax for the donors as well as the recipient receiving benefits tax free as well as a portion of their salary at much lower tax brackets plus the impact of payroll taxes.

(Not a tax professional and loopholes change over time.)

I also think expenses, even salaries don't really amount to that much of a tax avoidance when the sums are in the billions. Hotels every night of the year for your staff would still be under $1M per staff member.

I think (I don't know as i'm a UK citizen) that these are similar to trusts. It's fair to say that rich people avoid a lot of income tax when they fund these trusts, but the trusts themselves still then pay tax on income and expenditures. The main thing it allows is for wealth to remain in a family for longer periods of time with one big tax avoidance at the beginning (the recoup on income taxes)

Donations have to go to a qualified charity. Salaries don't. They do have to be disclosed, however, at least for a foundation. Churches don't even have to disclose, which is why they were so convenient for money laundering in The Wire (can accept arbitrarily large cash donations and don't have to tell anyone what they do with the money).

You are probably thinking of donor advised funds. A DAF lives in a broader 501c3 (typically setup by a financial institution) and you can put money in it for tax purposes. The money sits (and grows) while you decide where/when it will ultimately go. Crucially, with a DAF, because you took the deduction when you gave to the DAF the outflow from the DAF must go to another 501c3.

If money leaving a foundation must go to another 501c3 how does the 501c3 loop ever break? It breaks because foundations can (and do all the time) pay individuals, contractors, for-profit companies, etc.

Imagine the United Way trying to build an office. How could they possibly do that if their funds could only go to other 501c3s?

To that parent's point, < 1% has gone to charities which means the foundation is just spending money on the people that work in and own the foundation. I wouldn't need to get paid directly if I had a foundation that paid for everything I need or want.

If you have $1B you can already pay for everything you need or want. Donating it to your own non-profit, only to pay for your own expenses, is an extremely expensive way to "launder" that $1B into a tax deduction.

Yeah, it is really unclear to me how some people think charity donation makes sense just to get back some Fringe non-monetary benefits

Makes total sense, that’s why poor people commit tax fraud, not rich people who have no reason to want more money!

Poor people and rich people alike commit tax fraud every day. It's more of a personality issue than a wealth one.

> alike

Could you detail this?

If I understand you right you're saying that a 501c3 is a net gain in money?

Would you mind walking me through that?

You start off with $1B net. Presumably these are capital gains. You donate it to your own 501c3, and get 125M back on your taxes. Now you take out salary (taxed at what, 37%?), and get a total of $755M (including the $125M). No, that was a losing bet.

Ok, so you also spend it on other things. But to net gain on this you still have to actually spend less than $125M not only on actual charity, but also on overhead.

Basically can you launder this money at less than 12.5%? Keeping in mind that once laundered it's still not really yours. Sure, you control it. But it'll always be just mostly assets under your control.

You can't use that money to buy Twitter.

Also keep in mind that real money laundering can cost about 20-30%.

Is it even worth 12.5% if the billion comes with these huge restrictions?

Am I missing something?

Right, I first learned about this when being forced to watch some of the "Housewives of ..." shows by my wife. I couldn't figure out why all these objectively terrible people all had their own personal charities (many of the episodes revolve around the social group of the show going to each other's charity events).

It turns out it's a common, but legal, "scam". Take in funds from fundraisers, give away a little, then pay yourself a ridiculous salary for running the organization with the rest of the money. You can also have the charity "buy" things for future fundraisers like trips on private jets, or fundraising events in the Bahamas, etc.

I have no idea how it has stayed even remotely legal other than it seems a great many people above a certain wealth level all seem to be involved in it.

You'll see a lot of giant yachts that are in "research" foundations. They get tax breaks for supporting "research" and have a few jaunts with scientist in popular vacation areas.

Right. I mean 501c3's rules around politics are notoriously lax. You basically just can't donate to a candidate of a party. But there's plenty of 501c3's that simply don't explicitly represent a certain party go to pains to reach out to areas that are very reliably a certain party.

A lot of these "charities" being donated to out of DAFs are for political influence like this. They can push for laws and regulations that will benefit, in this case, Tesla or Twitter or whatever, and Musk now can play politics without having to pay taxes on that money

> then pay yourself a ridiculous salary for running the organization with the rest of the money

So instead of paying 20% cap gains, they choose to pay 37% federal income taxes + state?

Yes, because pocketing money directly from fundraising activities for a 501c3 is illegal, regardless of if you pay capital gains on it.

I'm not sure what you are saying.

Donating capitol that has gained value to a non-profit to then use to pay yourself a salary with causes you to pay more taxes than if you had just realized the gains and skipped the non-profit as cap gains taxes are lower than income taxes for the top bracket.

OP "legal scam" causes them to pay more taxes.

It may happen, but it’s not legal, it’s called inurement and the IRS can hammer you or strip the organization of its tax exempt status if it finds out. This applies not only to ridiculous salaries but also use of the charity’s assets for private benefit.

https://www.501c3.org/dangers-of-nonprofit-inurement-and-pri...

For instance: https://apnews.com/article/campaigns-donald-trump-us-news-ap...

What makes a charity "fake"?

If I start a charity, make myself chairperson and CEO or President or whatever, I "deserve" a reasonable salary. If my fundraising events bring in my salary + event expenses + what I can use for charitable activities, what does it matter if what actually goes out the door is 5% of all donations? I have to pay staff salaries and I have to pay event hosting fees.

In other words, for most of these things the difference between an A-grade charity like the American Red Cross (which puts out something like 90% of its charitable donations to actual charitable activities and the CEO makes over $700k/yr) and a charity with a CEO who makes $200k, but that's 50% of their overall donation income, but still moves their money forward towards their stated goal, the legal difference is imperceptible. The second charity may just be small, or not good at raising funds, or has limited reach, or has a charitable focus nobody cares about, or could just be a way for some socialite to make an extra $200k a year while hosting fundraising "parties" every quarter...it's just not possible to really tell.

Even in this example, the charity looks more legitimate than what the original posting is about, and there are tens of thousands of these.

Doesn't the CEO (i.e. yourself) pay income tax on the $200K? What was the point of this again?

So? It's free money.

This sounds like a different scam than tax avoidance. They aren’t avoiding taxes so much as outright scamming people into donating to a fake charity.

>these "charities" can pay out to their owners from tax-exempt gains on the back-end.

Even if this were true, that back-end would be taxable, so who cares?

That said, why would this make sense from the donor perspective? Why would I want to donate $1M to a charity to avoid taxes, just so that it can pay me $1M which I would then have to pay taxes on again?

Because the charity can expense things you can use without anyone paying taxes on anything.

Charity holds a conference at a resort, that's an operating expense. Present are the officers of the company, which is you and your friends and family. All expenses for the charity, paid from the million, and therefore untaxed.

Still seems like a pretty crappy deal to me and negative expected value. More so if you have your own Corporation that can do all those things. I feel like there is a n Physical limit on the number of tax deductible meals and vacations someone and their family can consume

Your own corporation pays corporate taxes that a non-profit does not, and you cannot transfer personal wealth to a corporation without paying taxes on it as you can with a non-profit.

tbh it's even more of a non-story than that, because his "own charity" is a donor advised foundation that openly dispenses money to a wide range of completely independent charities and charitable causes he and his brother pick (many of them quite well known and well regarded), not some secretive organization with some obscure purpose that might just be an arm of one of his corporations or a place to hide wealth from the IRS and invest it in private jets. That's pretty common way for rich people to give money

There's a sibling comment to this by @Someone1234 that explicitly contradicts this:

> The Musk Foundation in particular has donated less than 1% of the "charities" assets (most donations less than $500K, most years less than $1M)

> completely independent charities and charitable causes he and his brother pick

The money can go to any 501c3 they pick. So if there's a 501c3 that's pushing for regulation that will benefit Tesla or SpaceX or some "raising awareness" campaign that's a glorified marketing campaign or some org that influences research, etc... those are all easy pickings

Sure, but it can't go on megayachts or personal world domination initiatives, and Elon (or anyone else) could make tax deductible donations to those registered charities without a foundation in place.

Since the foundation publishes accounts, it's actually relatively transparent what he has and the eclectic selection of causes Elon donated to has been fairly widely reported on. It looks considerably more like a man chucking money at a lot of pretty standard causes than say, the obscure nonprofit "to promote interior design" that is the tax-free beneficial owner of Ikea...

"Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own."

We’re still talking about the guy who paid almost double what Twitter was worth right?

Correct, after you give billions to a charity the incentive is to extract that by the owners. It suck, but humans are assholes when you dangle large sums of money money infront of them. The route is administrative fees.

This is a tax move to stash the cash so it does not got hit by big tax bill immediatelly. That money can be then invested in twitter (thru charity), buy twitter bonds, or whatever. Or give payouts in smaller amounts to friends and family which will work for the charity. My bet is that they will buy twitter bonds thru the charity.

There is nothing wrong here and it is not illegal.

OK, this isn't a fair assessment, but does match appearances. Some details are important -- I'm adjacent to major donor fundraising and see this kind of thing happen all the time.

He donated to his foundation, which in turn re-donates and reinvests the money based on merit and priorities set by Musk to other charities. Of course, Elon being Elon, he probably has a huge hand in where it ultimately ends up, but this money is now out of his hands and into a "clearing house" where it can be bid / won by any charitable / non-profit that cares to submit.

This is extremely common with donors of huge wealth -- they pseudo-delegate the decision of what program to fund to a board of intelligent people sitting on their foundation, each member of which cultivates relationships with major programs for the wealthy person so that the money can be ultimately effectively invested without taking all the wealthy person's time.

See Bill & Melinda Gates foundation, or Warren Buffet foundation, etc.

this is no different from Gates and Buffet "giving away" all their money. Their kids are all in charge of their charities and it's just a way to get around taxes that is spun into positive PR because the media doesn't call them out. The whole Giving Pledge thing is a joke

https://www.axios.com/2022/09/17/the-ultimate-billionaire-ta...

I have a better idea. No tax exceptions for anything over 1 billion. 100% tax.

No human on this planet needs this kind of money. Even 100 million is too much already.

The money was made on the backs of the working class and they as in their elected government should be the one deciding where the money goes. If your government is corrupt then that is an entirely different issue.

isn't Bill Gates, Zuck, Bezos are all doing similar things.

If I had that money, I will certainly donate to my own charity or some charity I firmly trust.

The only exception is Buffet, who donated lots of his money to Bill Gates' charity, Buffet seems has no interests to manage that on his own.

It's your money, make your call.

It's a perfectly valid thing to do and can be done for the right reasons, but for a counterpoint you can look at the Trump Foundation. Trump and his family gave money to the foundation and the foundation bought things from Trump (ie hosting events at Trump properties). There's loads of small foundations like this that exist for self-dealing, nepotism and tax evasion. That's also not really unique to self-funded foundations. Something like the Gates Foundation is a huge operation that is doing a lot of big, expensive and highly visible projects. What Musk is doing with his foundation is less clear. Could be real charity, could be fraud.

Agreed, my point is there is nothing unusual, it's a common practice everywhere, so I don't get why Bloomberg needs a big report, not sure if it did for all other big guys in the past, otherwise it seems it has an interest to target Elon.

As far as fraud goes, I hope the system will work out when bad things went too far there. We're all innocent with good intention until proven otherwise, Elon should be treated the same, like him or not.

It was $5.7B. That's an enormous gift and one that was not disclosed at the time it happened last year. The Musk Foundation now has an enormous endowment and a hazy mission.

Instead of giving directly to charities like St. Judes - he funds his foundation which gives to charities like St. Judes. When you give away $5B, wouldn't it be irresponsible to not give it to a foundation? And if you have your own foundation, wouldn't it be dumb to not give it to your own foundation? This seems like a nothing story; except that it's in vogue to hate Musk right now.

While I agree that this is ordinary for very rich people, it's good reporting and context for us to know where and how the 2nd richest man in the world takes a tax deduction that we publicly fund.

..to St. Jude? With one intermediary? I don't see the big deal...

So in the same way that Bill Gates donates to his own foundation?

https://www.cnbc.com/2022/07/13/bill-gates-donates-20-billio...

and Zuckerberg, and everyone else with a shitload of money

Zuckerberg did not set up a charity, in part to preserve its freedom to spend however it wants. The Chan Zuckerberg Initiative is an LLC.

Minus the press release.

Here is Bill Gate's Press Release for 2022.

"With the support and guidance of our board, we plan to increase our spending from nearly $6 billion per year today to $9 billion per year by 2026. To help make this spending increase possible, I am transferring $20 billion to the foundation’s endowment this month." Jul 13, 2022 [1]

[1] https://twitter.com/BillGates/status/1547235386560155648

Yes, OP link was a press release by Gates too. I meant Musk didn't do a press release.

Ah. Thanks for the explanation.

Since DaniloDias is shadowbanned and he worded his response in a suboptimal way, I thought I'd paraphrase his response:

Gates and Zuckerberg publish plenty of press releases about their charitable giving:

https://countercurrents.org/2020/09/zuckerberg-wants-to-chan...

https://www.gatesfoundation.org/ideas/media-center/press-rel...

Bill Gates is on the good guys team now, since he's not actively and aggressively running a company. Musk is still a bad guy. You'd have to wait at least a decade or two for Musk to get old enough to stop being interested in actively running one or more companies and thus be on the good guys team.

Yes. Billionaires do this all the time and many of the Musk rent-free brigade on HN are realising and admitting that this isn't the 'gotcha' many of them had hoped for.

All the other billionaires doing this are also looked on with cynicism.

You realize that those of us who aren't Musk fans also dislike other billionaires, right? This is a class issue, not a personal one.

No, not at all in the same way.

The Bill and Melinda Gates Foundation actually spends its money on charitable programs.

https://projects.propublica.org/nonprofits/organizations/562...

The Musk Foundation spends very little (~2%) of its assets on charity.

https://projects.propublica.org/nonprofits/organizations/770...

Musk's "charity" is a tax-dodge coupled with an influence and access-buying scheme.

The classic billionaire tax move. Donate money to your own foundation to work on things you want while getting a big tax break.

Donating $5.7B to save an absolute max (37% tax bracket; he's probably much lower with most income via capital gains) of about $2.1B in taxes doesn't make financial sense, unless you've got a plan to siphon off at least $3.6B tax-free out of the charity. Why do people think a $1B donation saves $1B in tax?

it only doesn't make sense if you plan to individually spend that money on yourself. However once you have billions of dollars it becomes relatively difficult to spend that much on yourself. Therefore it becomes a place to spend money enacting the change on society that you want to see.

Sure, but that's a different motivation entirely.

That money doesnt dissapear - it is still avaliable for lobbying, hiring staff and doing many other things.

Or funding research projects that will benefit you indirectly

Yes, but the charity can pay for things for him. He needs to go to Europe and do "charity business", the charity can charter a jet for him, pay for his expenses, etc. Even better if he owns the jet, then he can essentially charter his own jet and have the charity cover the fuel and maintenance for that trip.

That $5.7B is still effectively his, untaxed.

He doesn’t need to shiphon anything. All the “donated” money is still in his control. In order to be effective at tax deference you need to separate the concept of who ownes the money and who controls it. As long as you still control it, it doesn’t matter who ownes it. That’s why a donner advised funds and similar concepts are used to reduce taxes or defer them.

In addition it’s also great for asset protection. For example if he gave a personal guarantee on some of the Twitter debt, then moving money into the foundation (as long as his Twitter stint was not fraud) will remove that out of his name and make it untouchable to the banks.

He can now use those funds to support trips to Mars and other projects. For those projects the charity might pay his expenses - for example a flight to attend a meeting in Hawaii. He can even use the money to hire his kids. The kids would have a much lower (w2) tax rate so effectively he reduced tax but kept the money in the family.

Exactly. It's not some hack that magically makes income tax liability just disappear, as many commenters are thinking it could be. Rather there are marginal tax benefits combined with strong asset protection, that make sense when you've got an obscene amount of money to manage so the administrative overhead becomes negligible - the question goes from "why" to "why not".

Another thing people are missing is that it's not an income tax dodge, but rather an estate tax dodge. The money will remain in control of his heirs, assuring they'll never go hungry or want for a place in the world.

It also creates more opportunities to play with asset valuations to evade taxes (eg separate the financial and voting interest of some stock in a closely held company, then claim the financial interest is worth very little without the control interest). But it's impossible to know if this is actually being done without seeing tax filings, including his (eventual) estate tax filing.

> Why do people think a $1B donation saves $1B in tax?

A distressingly large slice of eligible voters don't even understand how marginal tax rates work. Which is, like, the absolute minimum to have any clue whatsoever how US income taxes are applied, what tax bills will actually do if they become law, and so on. I'd be surprised if understanding of how deductions work is any more widespread.

[EDIT] Not a great source, but it's in-line with the results I've seen from better ones in the past:

https://today.yougov.com/topics/politics/articles-reports/20...

Roughly half don't understand how marginal tax rates work.

Can't find data on how many US adults understand how deductions work, but I doubt it's better.

Can't edit anymore: not mad about the downvotes, but I also don't understand them, at all. What about this rubbed people the wrong way? The answer to the question is that lots and lots of people don't understand how income taxes work, even a little. So many that one may expect to regularly encounter such people. I'll grant the results are from the social science side of things, which HN doesn't much care for, but that's just... where the answers to that question happen to come from.

> Can't find data on how many US adults understand how deductions work, but I doubt it's better.

Almost certainly much much lower seeing as how a ton of people here don't understand how deductions work.

It is possible to donate appreciated stocks. And the tax rate can be higher than 37%, if it's short-term gains in California since there's state tax as well.

To run the numbers on the 37%:

Charity: 5.7B deduction * 0.37 rate = 2.109B value of the tax deduction

Selling: 5.7B deduction * (1-0.37) = 3.5B value of the stock sale

In addition, the shares were at an inflated value - if he dumps 5.7B onto the market, it's going to drop the value of the remaining 100B of shares. Whereas by donating to the charity, you get the 5.7B deduction, and the fund you donated to does not even have to sell the stock. Even if the stock drops shortly after, such as in this case, he still gets to keep the large deduction. See https://dlj.law.duke.edu/article/insider-giving-avci-vol71-i..., illegal but unenforced.

Also, he can use the charity money anyway to pay for various things he feels like spending money on - other billionaires have used personal charities to settle lawsuits, employ their children / cousins, invest in businesses of friends, etc.

How does the tax break work? Don't you still have to pay income and/or capital gains tax on everything that goes into the fund minus a pretty small amount?

I don't have experience donating to a charity that I created, so rules may be different, but in general no you don't pay any tax on donated in-kind securities and the amount of the deduction you take is generally the market value of the securities on the day they were transferred.

Let’s say I make $100 at an effective income tax rate of 35%. I pay $35 in taxes and keep $65.

Now say I make the same $100 but I give $20 to a qualifying nonprofit. I have $80 left, on which I pay 35% ($28), leaving me with $52.

I have $13 less than I would have without the contribution. But if I own the nonprofit, funds under my control go from $65 to $72.

The important distinction is that you cant spend those non-profit funds the same way you could cash in your pocket.

It is under your control, but you can't use it to buy a Hawaiian island vacation home.

You can absolutely borrow money from the charity. I worked at a non-profit and high-value donors would donate without actually needing to send money. It was all paperwork. The charity only really was paid when the donor died.

Well, sort of. I can use it to buy a Hawaiian compound and retreat that my nonprofit will use, and it might have living space and my taste in art on the walls, and the people invited for conferences might be my friends.

At that point it comes down to regulators’ appetite and ability to enforce, and of course the worst cast is some fines. As long as the EV of fines for inappropriate spending that is caught is less than the tax savings from both caught and uncaught abuses, I’m still ahead.

But really I don’t think the abuses are that overt anyway; Elon can buy his own Hawaii property. These things are usually more funds to hire friends and family and engage in political/social spending at lower effective costs.

The worst case is actually that the IRS takes away the charity’s tax-exempt status, thereby negating the whole strategy.

If we're talking about billions of dollars, the worst case is spending millions on lawyers to contest the status for years.

So a [wealthy person] can live/work out of a Hawaiian compound bought for the purpose of a charity using a charities money?

Or are we talking about the charity workers themselves living it up... like we've seen in those famous recent fancy houses purchases in Canada and UK.

true, but it is possible to use it in ways that benefit you or your priorities. I'm not saying that is what Musk is doing, but the ability to spend a billion dollars or potentially charitable endeavours can have direct benefits to the giver.

Sure, but there is nothing inherently wrong about that.

If I'm gay and donate to an LGBT rights charity, I would love to see direct benefit.

If I play sports and donate to my nonprofit Club, I also hope to see direct benefits.

Charitable donation by definition is donating to things that Advance your priorities. Those might be a world with less hunger, saving lives, or whatever. Nobody donates to charities that work against their priorities.

Sure you can:

Here's a nice 6 million dollar house bought by a charity:

https://nymag.com/intelligencer/2022/04/black-lives-matter-6...

And a nicer 8 million dollar house bought by the same charity (all cash, must be nice)

https://www.washingtonexaminer.com/restoring-america/fairnes...

you see stories like this in the news fairly often, this is just two recent examples.

I totally agree that there are some corrupt Charities out there and bad practices. However, I don't think that's a condemnation of the concept of Charity as a whole.

I'm not "condemning" charity, some are really good and I financially support two that are important to my own family.

My point was simple, someone said charities cant buy houses, but they in fact can and do.

That person was me. I agree that non-profits can buy real estate.

Maybe I wasn't clear, but my point what that charities cant legally operate for the sole benefit of the donor.

I used buying a vacation home as example of this. A charity cant do that legally. A shady charity might buy a headquarters as a pretext an use it as a vacation home.

Exactly. It's more about control, where the money goes and how it is spent. It's not their money anymore and can't spent it as they wish. Rich people are obsessed with that (and I don't blame them. I wish rest of the world is concerned more to where their tax dollars or charity they give go). Huge percentage of charity money is spent on corrupt activities, bribe etc. People who give more tend to care more about where the money goes.

I know for my self, I don't really care when I donate 1-2 $/eur. I don't think that in "value" terms because amount is so small and often I don't question too much (or investigate) where the money goes. But if I donate $500 then I try to gather as much information as I can about the organization, people involved, previous projects etc. I can imagine this feeling (having control) would only be amplified if I tried to donate millions of dollars.

I'll do one even better.

Let's say you give $50 to your charity from your $100. Then you "borrow" it back from the same charity to invest. You chose a high dividend investment strategy and make $10 in dividends alone. You pay $17.50 on your taxable income ($50) and $1.5 on taxable gains ($10). You can donate, borrow, and spend through that charity until the day you die. And you would still pay less in (19%) than your average working stiff.

I thought there's a limit to how much you can deduct from qualifying nonprofit donations, no?

I'm not sure I see the big problem here. Our government has decided that if you want to dedicate your resources to an approved cause that it won't hinder that cause by taxing those contributed resources. We don't place limitations on who is allowed to run a charity, and the range of valid exempt purposes[0] leaves a lot of potential for those resources to be used.

Just because someone is a billionaire or not shouldn't determine whether their charitable contributions are self-serving or not. Millions of people donate to their churches on a weekly basis and directly benefit from those contributions as well.

[0] https://www.irs.gov/charities-non-profits/charitable-organiz...

Parent's point is probably that their government should change opinion on the matter and tax contributions to your own organizations.

Musk's behavior being currently legal or incentifized is kinda beyond the point.

I'm aware of that. I'm adding on that just because Musk has a lot of money shouldn't have anything to do with the laws. In my opinion, if he's not allowed to benefit indirectly from his charitable contributions then neither should the average churchgoer.

“rules are different for you because you have a lot of money” is a concept we can’t get rid of. Trying to make it irrelevant is exactly why people throw money at ethical issues and socially disruptive behaviors, and get away with it unscathed.

When street parking laws have nothing to do with wether you’re rich or not, that becomes an issue. Charitable contributions having nothing to do with it is (to me) an issue.

TBH I’m atheist, so my sympathy for churgoer tax breaks is limited, but I’d argue donation to orgs that benefit yourself shouldn’t be tax free in general. To take a silly example: if my street looked like a garbage slum and I made a non profit to make it look gorgeous, while there might be wider communal impacts, it’s something I and the street residents should have been doing anyway, and with no tax break involved.

As a Christian, I feel the same way about tithing (I'd do it whether there was a tax break or not). As a pragmatist, I'll take whatever tax break I can get. I do think it becomes difficult to draw a line. What I mean is, one reason why one might donate to a charity like Ronald McDonald House (as a very prominent example of a thing I've personally been on both ends of) is because when you're the one in need you want it to be there for you. At some point this conversation comes down to assuming the worst motives in people, and I don't think you can write policy from that.

> Our government has decided

Who exactly is this perfectly unbiased, disconnected, non-influencable group of people you call “our government”?

Are you suggesting that the concept of a charitable contribution is only for rich people? My understanding and personal experience is that many people benefit from this mechanism, most of them not rich by any local standard.

I’m not suggesting charitable donations are bad, I’m saying the loopholes need to be fixed. Normal people can continue donating, that wouldn’t change.

Just because the government is looking out for a billionaire's interests doesn't mean it is necessarily in the public interest. Governments are not flawless. This is quite possibly an area that could use improvement.

I would do the same thing if I had the money to do it. So would you. Why waste it on government?

did you watch Chappelle's segment on how trump walks out of the house, says what hes doing, then walks right back in?

This reads like a hit piece, and a poorly executed attempt if so. This is standard practice and not uncommon. If we’re going to excoriate billionaires for putting their name on a foundation, shouldn’t Gates, DeVos, and others also be held to the same scrutiny? The article throws in an SBF comparison simply because both parties support the same brand of altruism.

It's reporting facts.

Agreed. Also it’s not like Musk was going around saying look at me. I donated 5.7 billion to charity.

The hive mind is ridiculous

When we’re talking about billionaires and nonprofits and taxes, I’m having a hard time seeing how one’s opinions could hinge on public statements rather than the money and impact.

>If we’re going to excoriate billionaires for putting their name on a foundation, shouldn’t Gates, DeVos, and others also be held to the same scrutiny?

Yes.

I actually agree with you here- my point being that I’d be far more compelled by research into overpaid administrators, short-sighted donations, etc.

Would be keen to read an article where the $500k yearly salary of the charity’s CEO is examined (this is the case for most major charities looking for “the cure”)

yes

Doesn't Bill Gates get all sorts of shit constantly for his foundation?

> shouldn’t Gates, DeVos, and others also be held to the same scrutiny?

Did they try to keep it a secret?

Is calling it a charity accurate? It is a 501(c)(3) non-profit, but not the “public charity” subtype, rather it is the “private foundation” type[0].

[0] https://www.influencewatch.org/non-profit/musk-foundation/#

[1]Types of 501(c)(3) orgs: https://quickbooks.intuit.com/r/starting-a-business/understa...

Regular mortals maximize their 401k contributions, use Backdoor Roth IRA, FSA, optimize for long-term capital gains, etc. Is this all legal? Absolutely. The point is - nobody likes paying taxes - people try to minimize whatever it takes. Billionaires do the same. Instead of opening Flexible Spending Account, they start a charity. Instead of using Roth IRA loophole, they start off-shore corporations. Basically, they do pretty much the same what you do, but on a different scale.

They seem pretty good at getting their taxes down to zero, while us mere mortals have to be happy with deductions.

Mere mortals are often paying 0 tax on their investments(ie deferred). Same as the ultra wealthy do.

The issue is being a W2 wage slave, err i mean employee

Actually, mere mortals pay tax eventually when they cash out their investments to pay for the things they want. The wealthy get to take low-interest loans against their investments to pay for the things that they want, without ever having to cash out. They never have to pay those taxes, and their inheritors don't either due to the truly insane cost basis step-up benefit you get when assets are transferred to next of kin upon death.

The cost basis step-up is not insane, IMO. It's partly practical ("how am I going to find out the date purchase and basis of some shares my grandfather bought in an account that was doing dividend reinvesting?!"), and partly to avoid unexpected outcomes ("grandpa gave the house to Alice and the rest of his estate to Bob"; if capital gains were due on the house, would Alice have to pay them or would Bob?).

IMO, the basis should be as of the date of death, with any taxes due owed from the estate, not the heirs.

(It's also fairly difficult to repeatedly exploit this as a loophole, as you have to die to take advantage of it. If we're looking to close loopholes, ones that can be repeatedly applied might be more fruitful places to start.)

Stepped up basis came out of the idea that one was already paying estate tax. Now that estate tax has disappeared for many, it seems ridiculous.

The IRS has no problem requiring you to maintain paperwork across generations. For example I've got some series EE savings bonds I inherited from my grandmother, where income taxes were partially paid (you can effectively switch just your savings bonds to an "accrual" accounting method with a specific election). I've got to keep track of this aspect until they mature, so I can subtract the already-taxed income on my own taxes. Same thing.

The answer to your hypothetical is that Alice would have to pay the capital gains, but only when she sold the house. Which is the same thing that would happen currently if grandpa gave away his stuff to Alice/Bob in his lifetime.

For an unsophisticated Grandpa George, he may have intended a roughly even split based on the notional value of the paid off house being the same as the rest of the estate, while the net result would be different after paying CG.

I guess I’m just not too fussed about the government not getting a lick when someone dies and would rather the family and other heirs receive whatever they’re able at what amounts to a sad time.

not trying to say blockchain is the answer to everything, but an asset ownership chain (keyed by the asset, so a tree if you think of it as all assets) . Would be a fantastic system of record for keeping cost basis of assets history.

Eg my home has a linked list of ownership w/ cost basis details back to it's inception/root.

Couldn't disagree more. Buy, borrow, die, is an insidious loophole that is costing the government billions in lost taxes.

> grandpa gave the house to Alice and the rest of his estate to Bob"; if capital gains were due on the house, would Alice have to pay them or would Bob?

Capital gains taxes are paid when the asset is sold. When the house is sold the owner should have to pay the full capital gain tax, not the amount that has accrued since grandpa's death. If alice doesn't want to sell the house that's up to her.

An hour before he died, Grandpa George could have sold the house and excluded $500K of capital gains (if his spouse died within the prior two years) or $250K otherwise. He could then pass his estate tax-free to heirs (assuming it was a typical "normal person sized" estate). In that case, the value of the house is now in [stepped-up/not taxed] dollar bills.

Why should the fact that he transferred a minute after he died rather than 60 minutes before make a difference to the taxes owed? Sell it for a fair market price to Alice a minute before you die, then transfer the proceeds of the sale to her as part of your estate. Same effect.

I don't care about excluding up to $500k. I care that billionaires entire fortune is excluded when they die. We can go round and round about which loopholes make sense. But in the end I don't think there is any reason that billions of dollars of equities should be excluded from paying capital gains taxes just because their owner died. You shouldn't get a tax advantage for dying. Selling everything you own the day after you die should have the same tax implications as selling everything the day before you die.

I care more about what happens to the estates and heirs of the 3M less than millionaire regular Americans that die every year and what happens to their estates than I do about the ~15 billionaires that die each year.

> Selling everything you own the day after you die should have the same tax implications as selling everything the day before you die.

I agree with that . That's exactly why the vast majority of family homes would be passed along tax-free, with stepped-up basis (as was my point above: "the basis should be as of the date of death, with any taxes due owed from the estate, not the heirs" [which I thought earlier you "Couldn't disagree more"]).

No they don't. Mere mortals don't receive enough income from their tax-deferred investments (lol), social security, and elderly side-hustle (part time cashier at Ross?) to incur a tax liability. Even taking full advantage of the senior discount at Denny's they won't leave behind much to their kin.

+1 the tricky part is realizing that if someone isnt earning enough to pay taxes, they're often net recipients of "stuff" (ie, money, services, etc) .

This means a lot of society has a net negative tax rate in the sense that they consume more than they give.

A quarter of Americans don't have a 401k, and most of those who do aren't maxing it out. If you're doing all of the things you've listed you're not really a "regular" anything any more. You're rich. Which is fine, but you should really recognize the fact.

Yeah it's basically impossible to max out 401k contributions unless you're rich or at least nibbling at the bottom edge of rich. For one thing, you probably need to own the company that pays you in order to make it happen. Like, sure, I expect some very successful general contractors and such manage to do that, it's not just the stereotypical richie-rich sorts who can, but even a fairly high-paid W2 worker drone cannot, even if they have the money to, because of how the rules work. The bare minimum level of success to play that game is to have a business income—not W2 income from a company someone else owns—that's, oh, IDK, let's say about 3x household median in the US, and you'll likely need more than that unless you're also quite frugal. Which means not many can do it.

> Yeah it's basically impossible to max out 401k contributions unless you're rich or at least nibbling at the bottom edge of rich.

https://www.irs.gov/retirement-plans/plan-participant-employ...: ‘The limit on employee elective deferrals (for traditional and safe harbor plans) is: $22,500 in 2023 ($20,500 in 2022, $19,500 in 2021 and 2020; and $19,000 in 2019).’

The median wage in the U.S. is under $55,000; anyone making $80,000 or more can max out his 401(k) contributions and still live an above-median lifestyle.

>Regular mortals maximize their 401k contributions, use Backdoor Roth IRA, FSA, optimize for long-term capital gains, etc.

The only thing I would consider to be 'tax avoidance' in there is the Backdoor Roth, which is only used by a small subset of Americans because the majority don't make enough to need it. And even then the Backdoor Roth is a loophole/oversight that Congress is too cowardly to close.

The rest all serve different purposes, primarily to make necessary aspects of life (Retirement, Healthcare, etc) more affordable in our unaffordable country.

There is no world in which a billionaire can donate billions of dollars and come ahead financially. The only reason to do this is the legitimate intention to use that money for reasons that aren't self serving. Conversations about "hiring his kids" and treating it like a slush fund are ridiculous. If he had a dozen kids each getting the maximum allowed salary (~$300k) for 30 years, that's still only 1.8% of the total contribution.

A tax avoidance scheme which also placated a twitter argument about his contributions. Unsurprising.

Every ultra-wealthy person has a charity for this purpose, right? Clintons, Bill Gates, etc...

Gates foundation actually does charitable work from what I can tell ?

Yep so do Musk and Zuck's charities.

Musk's foundation does effectively no charity work. Gates foundation is donating 100x as much per year.

Invests in vaccine companies (Bill Gates stating it was his most profitable investment ever) & major funder for WHO (who’ve been pushing COVID vaccines).

Might be a conflict of interest here.

PS: most foundations are probably required by law to do a little bit of actual charitable work, but I believe these foundations are mainly tax exempt investment vehicles and a way to peddle influence with governments.

> Gates foundation actually does charitable work from what I can tell ?

Than your purview of 'charitable' work includes coaxing Oxford to not open source vaccines to the developing World in order or profit from the largess that big pharama reaped during the pandemic [0] and subsequently caused a lot of unnecessary deaths? That isn't even including their aggressive consolidation of arable farm land in the US with clear ties to large pharma and chemical corps under the auspices of their foundation and ties to the WHO.

And I'm not even going to delve into the Epstein relationship Bill had which included trips to pedophile island.

If so, you should really look into what you deem as 'charitable work' tbh.

0: https://www.wired.com/story/opinion-the-world-loses-under-bi...

And can’t be clawed back in bankruptcy. Great way to preserve wealth

You're by definitions giving it away.

It does nothing to preserve your own wealth even if it goes to a charity you control. It's no longer your wealth and unless you want to do something illegal its not coming back to you and can't benefit you.

Past a certain point the goal of having money is the ability to wield influence. If you donate money to charity you control you can still use that charity to wield influence.

I don’t really know but I’d guess there’s a way to close down charitable foundations and take the money back. Though presumably with a tax bill.

> It's no longer your wealth and unless you want to do something illegal its not coming back to you and can't benefit you.

This is peak naivity - you are totally wrong.

Exanple one - charity can make political donations. Example two - can hire lobbyists. Example three - it can buy voting shares in companies you want to control. Example four - it can hire your family members or friends and pay them salaries.

Charities (501c3) cannot make political donations or even endorse candidates. The Sierra Club lost their 501c3 status over this.

> Exanple one - charity can make political donations

https://www.fec.gov/help-candidates-and-committees/candidate....

> Incorporated charitable organizations—like other corporations—are prohibited from making contributions in connection with federal elections. Unlike most other corporations, charities face additional restrictions on political activity under provisions of the Internal Revenue Code.

> Example three - it can buy voting shares in companies you want to contro

https://www.infinitegiving.com/blog/nonprofit-investing

> to avoid violating U.S. Securities and Exchange Commission (SEC) regulations, your investments should not benefit your nonprofit’s employees or board members.

You're calling somebody naive but your statement is nothing but lies.

> Exanple one - charity can make political donations

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.

> Example two - can hire lobbyists

In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying). A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.

> Example three - it can buy voting shares in companies you want to control

Which will lead to your tax-exempt status being revoked if it looks like you're doing business.

> Example four - it can hire your family members or friends and pay them salaries.

Which you can already do with your existing companies.

Mybad, I conflated non-profits and charities. All political thinkstanks seem to be non-profits.

Evidently I dont understand the mechanism, but apparently charities can be used for political purposes:

https://www.politico.com/news/2022/11/16/two-anonymous-425-m...

Do you think you could have worded your reply differently?

You can be employed by your own charity. Your own charity can provide you housing, cars, etc. even your vacation and travel can be paid for by your charity.

> You can be employed by your own charity. Your own charity can provide you housing, cars, etc. even your vacation and travel can be paid for by your charity

is this really true?

Your own charity can pay for your personal vacations and travel?

Do you have a source for that?

It’s not a vacation. It’s a mission trip. It’s not a plane ticket to Vegas. It’s a ticket to a charity summit. It’s not a club table fee, it’s a team building event.

Lots of ways to get what you want through qualified, albeit non frugal, business expenses.

Ok, sure, then this is no different than your own company paying for "business" trips.

So no benefit or difference here. You just need to be willing to relax your morals and hope you don't get caught by the IRS.

> this is no different than your own company paying for "business" trips.

Except this foundation will exist until the end of time and who knows how long tesla will be around.

How on earth is this a tax avoidance scheme? Complete nonsense. Sure, he doesn't pay tax on that money, he also loses that money. This is not a net gain for Musk personally. He can't directly send money from the charity to himself, to him personally the money is more or less gone. This is less greedy then simply paying tax on the money and spending it.

If I gave you complete control over a billion dollars in a "charity", don't you think (if you were so inclined) you would be able to find plenty of ways to spend that money in a way that would benefit you?

I.E.- I might buy a house, and then have my charity buy a huge amount of land around it as an investment, to effectively turn my 1 acre homesite into a 100 acre estate

Maybe I'd have my charity teach at-risk children to ride horses, so I could build some nice pastures and have horses in my front yard.

Of course- the professional landscapers who my charity hires to maintain the grounds would probably cut me a pretty good deal on doing my personal estate as well, while they're out there

And maybe my executive assistant who runs my horse charity would pick up my dry cleaning now and again

All of that combined for the rest of Musk's life wouldn't even get close to 1% of his total contribution.

How about his children and his children’s children? You can inherit control of a foundation you know

If he had a dozen kids each getting the maximum allowed salary (~$300k) for 30 years, that's still only 1.8% of the total contribution.

Money is just something you trade for something you need or want. For most of us, we exchange money for stuff (food, clothing, shelter, transportation, toys, etc).

At some point, if you earn enough, you exchange money for time. You no longer need a job, and can spend your days as you wish because the stuff that you need is covered.

And then beyond that, when you are free and have no risk, what do you spend money on? There comes a point where ultra wealthy people spend it on power, control, and influence. If the money is taxed, it is no longer available to you to spend. But, if there were a way to shift it to a place where you could direct it in ways that you want for causes, power, or influence, then it remains effectively in your control. He didn't lose the money. He may lost his ability to use it to buy himself stuff, but he doesn't want stuff at this point.

/r/accounting has a thread about this.

https://www.reddit.com/r/Accounting/comments/zlunm5/tax_ques...

It is nothingburger... unless the charity is shady.

https://archive.md/zJVM9

Tax optimizations.

I have no problems with this, legit things can be done under charitable umbrella, and we should be thankful for the donations.

(Massive paintings of oneself on oil canvas notwithstanding ... ahem ... Mr. 'President')

But it's the insufferable populist hypocrisy of it all!

Please let's just talk and report about it for what it is. The press might even want to use the term 'NGO' where applicable, irrespective of the PR spin of the non-profit 'charity'.

Fascinated by the sheer amount of emotional reactions here.

What a big "gift". It is obvious he need ways to avoid paying taxes after selling so many shares of Tesla.

Once the banks behind the Twitter acquisition want their money back, the tax problem will go away...

Avoiding paying taxes by spending even more money that he can no longer use for himself? There is no way to financially come out ahead by donating to charity.

You didn't think this through. There is little charity in a private foundation: besides the immediate tax breaks the billionaires receive, the foundation is required to spend only 5% of its endowment on things that are remotely related to charity. The rest of the money is used like always: to buy assets, like stocks. These assets are in practice still controlled by the owner of the foundation. For example, Gates has for decades used his billions to invest in biotech that will ultimately benefit his personal investments. And I'm not event talking about the political power you can buy with your "charity giveaways".

Let me get this straight. Elon donated $6 billion in Tesla shares to his non-profit... so that his non-profit could buy Tesla shares to prop up his stock price? This makes zero sense.

He will get a tax break and he doesn't even need to sell the shares immediately. And he still controls the shares through the foundation, just for starters. Don't you think this is a sweet deal? Every aspect of the "charity foundation" created by billionaires is designed to benefit them the most.

If I told you that you can control your wealth, diversify your holdings, and pay only 5% of assets per year (in the way you personally decide) instead of 15%, 20%, or 25% in taxes, would you think it is a good or bad deal?

Controlling the shares through the non-profit means nothing. He has control even without those shares, and the only difference is that they're now permanently gone as an option to sell and profit off of. You still call this "controlling your wealth" but it's literally the opposite - that $6 billion is now extremely limited in what it can do now in terms of selfish goals.

Incorrect. Elon still controls everything he puts on his foundation, and when he's gone he will appoint people to control it. That is a fact. He can still sell those shares (without paying taxes) and diversify his holdings if necessary. He can invest in other companies using that money to help him achieve his goals. It is just a bunch of money that he can control in several ways. You just don't have great imagination, but Elon and his lawyers know what is possible.

Highly recommend the book "Dark Money" by Jane Mayer to understand the charity-to-PAC pipeline that exists in the US .01%'ers. Billionaires hate paying their taxes, so when they're forced to they divert their money into a 501(c)(3) or (4) that they're in control of, and use the 95% of non-charitable funds to do their dirty work, and the 5% of charitable funds to create academic environments that support their goals.

You can get the same tax loophole! https://www.schwabcharitable.org/non-cash-contribution-optio...

If you have appreciated stock, transfer it into a DAF, realize a large tax deduction to offset a high income year, and take the standard deduction other years.

Seeing lots of confusion on here so: I put 15% of a mid-8-figure startup exit into a private foundation, AMA

The public perception difference is quite easy to see. Compare these two statements:

1. "I gave $5B to charity"

2. "I gave $5B to my charity"

That they're both charities does not wash away the feeling that one of them is a bit less selfless than the other.

Bill and Melinda Gates Foundation would also be "my charity", would it not? Or are you distinguishing between foundations and direct recipients of charitable donations?

You're correct, it would be.

However, when the Gates' donations are disclosed they tend to say "$xB was given to the Gates Foundation" while Musk's was apparently "donated to a charity". (Note: I do not follow this topic regularly, this conclusion was based on some basic searches.)

To dig a bit deeper, it could be argued that the contributions and outcomes of the Gates' foundation are relatively well known at this point while Musk's outcomes are less so.

> while Musk's was apparently "donated to a charity".

Musk made no public announcement about this and declined to comment when asked about it. He wasn't trying to score social media points by suggesting he was about to cure cancer. This became public knowledge when he was legally required to report it to the SEC.

Gates on the other hand loudly announces all of his contributions.

What I personally don't understand is why everyone is still trying to draw moral conclusions about how this man's words align with his actions. It's a complete waste of time.

Of course it did. Just how SBF's gifts went towards his own friends and family. Why do people expect anything else I don't understand.

Comparing SBF and Musk does not seem right. For all his faults, Musk has actually created real products.

SBF on the other hand seems to have been really good at raising money. Much like Elizabeth Holmes.

Musk has found his way towards people who created real products. SBF basically didn't have those skills. But they are both grifters.

https://archive.today/zJVM9

"I want to have as much as money I can hold legally by WHATEVER means." Charity? What's that?

https://archive.vn/zJVM9

If he didn’t try to keep it a secret it would seem totally reasonable. Concealing it makes it seem shady.

Hillary Clinton - Clinton Foundation = Good

Barack Obama - Obama Foundation = Good

Bill Gates - Bill & Melinda Gates Foundation = Good

Mark Zuckerberg - Chan Zuckerberg Foundation = Good

Warren Buffet - Buffet Foundation = Good

ELON MUSK SATAN'S ACOLYTE WHO WROUGHT UPON THE WORLD THE REMOVAL OF HEAVENLY DAUGHTER VIJAYA GADDE NOBLE DEFENDER AGAINST THE LIES OF THE DRUMPF = Mystery foundation = EVIL

The overall zeitgest is just reaching because he is saying heterodox things.

It’s ok, you don’t need to have an emotional outburst. Try taking a breather.

> Hillary Clinton - Clinton Foundation = Good Barack Obama - Obama Foundation = Good

> Bill Gates - Bill & Melinda Gates Foundation = Good

> Mark Zuckerberg - Chan Zuckerberg Foundation = Good

> Warren Buffet - Buffet Foundation = Good

> ELON MUSK SATAN'S ACOLYTE WHO WROUGHT UPON THE WORLD THE REMOVAL OF HEAVENLY DAUGHTER VIJAYA GADDE NOBLE DEFENDER AGAINST THE LIES OF THE DRUMPF = Mystery foundation = EVIL

> The overall zeitgest is just reaching because he is saying heterodox things.

This is a vapid comment. Other billionaires' charitable foundations and ventures are regularly scrutinized and criticized — hell, there's a rather large subset of Americans that believe the Clinton Foundation is a cover for clandestine operations.

It's a comment on the timing which this reply does not address

They're all bad

Trump's foundation was actually misusing funds though, they lost the trial.

Why is this flagged? Does Musk have admin pull on HN too?

He is an obscene abomination.

Sarcasm?

No, my friend. This man is quite a burden on the collective consciousness.

Always the grifter.

shocking. /s

It's amazing how many coordinated attacks there are against Elon Musk. He's clearly changing minds in ways that many media people don't like. Losing control of the narrative must feel existential.

Wait until they hear about what Bill Gates does these days.

It's strange that the more Bill Gates donates, the richer he gets-

The secret Bill and Melinda Gates Foundation ... I have been doing some digging (citizen journalism) and you will never believe who is behind it ...

People should research how the Bill Gates foundation has given nearly $400, million to media organizations, organizations that will never say a bad word about gates. The man is literally bribing media companies, but go ahead and believe that it’s Elon who is the evil one

Always two there are. No more, no less.

what does this mean?

Phantom Menace quote.

Most people who are angry about one are angry about the other too, everyone knows it's a tax avoidance scheme

This makes no sense. Tell us how Musk comes out ahead financially in this situation.

He gets to donate money to "charity" and still controls who benefits from it. The donation reduces their tax burden and they still benefit from the power of wielding said money, with some additional strings.

You really think the richest man on the planet is doing weird little non-profit loopholes to wield power? You think having $6 billion in his non-profit has any impact whatsoever on his ability to influence things with his money? None of this puts him ahead financially and there is zero benefit to him doing this for "tax avoidance" if his main motive is maintaining as much money (and resulting power) as possible.

I find it god damn hilarious that Elon setting aside billions of dollars for non-profit work still manages to rile people up enough to suggest he's just being an asshole and doing it for selfish reasons

my dude why do you think he bought twitter? had a video of him being boo’d removed? had the guy posting public jet info banned? he’s as thin skinned as any other mortal, the guy offered a flight attendant a horse in exchange for sex

every billionaire has a non-profit like this, trump was so stupid he actually used his for real fraud instead of the typical wankery

> the guy offered a flight attendant a horse in exchange for sex

no, he was accused of doing this without any evidence to back it up

should we start calling Joe Biden a rapist because Tara Reade accused him of it?

the richest troll in the galaxy

Its interesting how Elon Musk became a target of large media outlets' attacks since he de-facto entered US and world politics. The way he entered it is novel and technological. Fascinating to see how this story unfolds further.

That's his preferred narrative. The truth is that Elon Musk has been subject to negative attention for years because of market manipulation[0], abhorrent labour practices and safety record[1], and obsession with inserting himself into the limelight via poor behaviour[2] or over-promising things he can't deliver[3][4] — to name a few reasons why he's viewed unfavorably.

[0] https://www.sec.gov/news/press-release/2018-219

[1] https://www.forbes.com/sites/alanohnsman/2019/03/01/tesla-sa...

[2] https://www.theguardian.com/technology/2018/jul/15/elon-musk...

[3] https://www.businessinsider.com/elon-musk-tesla-ventilator-c...

[4] https://jalopnik.com/elon-musk-promises-full-self-driving-ne...

Where's the equal or louder negative attention for billionaires who profit off death and destruction? That use actual slave labor for their projects that result in tens of thousands of deaths? That wreck the environment without consequence? That promote harm and violence to disadvantaged groups? That exploit child labor?

The issue is clearly not that Musk says dumb shit on Twitter and missed a deadline for his pickup truck. The issue is that society has a rage boner against him and people like you are perpetuating it while missing the wealth inequality forest for the Elon trees.

> Where's the equal or louder negative attention for billionaires who profit off death and destruction? That use actual slave labor for their projects that result in tens of thousands of deaths? That wreck the environment without consequence? That promote harm and violence to disadvantaged groups? That exploit child labor?

The sad reality is that these egregious human rights violations often fly under the radar because their perpetrators know how to keep their mouths shut. Elon is constantly in the limelight because he intentionally inserts himself there and is openly flaunting his wealth and disrespect for others. It's no surprise that a high-profile person constantly acting belligerent, lying, and antagonizing people receives so much attention from the media.

It's the same reason why Martin Shkreli went to jail and not any of the pharmaceutical executives who've ruined or ended millions of lives.

> The issue is clearly not that Musk says dumb shit on Twitter and missed a deadline for his pickup truck.

This is an inaccurate and dishonest summary of what I linked in my comment.

> The issue is that society has a rage boner against him and people like you are perpetuating it while missing the wealth inequality forest for the Elon trees.

You are creating a false dichotomy to simp for a billionaire who treats his employees and other people around him as disposable means to an end. The sins of other people does not make it okay for Elon to sexually harrasses and abuses his employees, report a fake shooting threat to spite someone for whistleblowing[0], abuse and kill countless animals in rushed and botched testing... I could go on.

[0] https://www.bloomberg.com/news/features/2019-03-13/when-elon...

Literally everything you're saying is wildly biased hyperbole or just outright unsubstantiated. I can't take this back and forth seriously if you're going to come it in such bad faith

> Literally everything you're saying is wildly biased hyperbole or just outright unsubstantiated. I can't take this back and forth seriously if you're going to come it in such bad faith

It's "wildly biased hyperbole" to point out Elon's unsavoury behavior?

The fact you're claiming I'm wildly biased but won't so much as acknowledge anything I've mentioned that paints him in a bad light is laughable.

Ah, the daily liberals are mad at Elon post.

When people talk about taxing billionaires this is where we should focus. Stop the tax deductions and they will start paying their fair share.

Not a real brilliant long-term move. Why?

Tesla's premise is that they can balance not having large revenues in manufacturing for a period of time to build out the EV industry as Tesla's major revenue is in fact carbon tax credits. The problem is the competition is far greater in resources than Elon has guessed and that will tend to blind-side soon.

Or in short words, Elon is spending stuff he no longer in the future has.

> Tesla's major revenue is in fact carbon tax credits

Why are you outright lying and spreading misinformation? It's very easy to search online and see that their sale of carbon credits is, at most, a few percent of their total revenue over the past 5 years. I actually did the math and it was 2.4%

The material improvements he could have gotten for this money...

He could have created tens of thousands of homes in apartments and gifted them to municipalities to be social housing, putting a massive dent in homelessness.

He could have built and furnished schools. He could have bought public transit vehicles. There's countless things that would have real, immediate, material impact on thousands of lives.

If you were to do any of those things it would make the most sense to do them through your own charitable foundation... I'm not saying that's what he's going to do with the money, just that reading this story and then responding how you did makes no sense. Half the people in this thread seem to have absolutely zero understanding of what's going on here.

I'm aware of how trusts and foundations work. Elon Musk has done nothing to suggest he's got charitable intent. The dude is barely one step above a con man, egomaniac, and compulsive liar.

There's always somebody out there who knows how other people should spend their money.

I'm spending mine on reforestation of hundreds of acres of land formerly logged and protecting it into old growth.

I also spend mine on offering sliding scale, below market rent to those in need in the house I own.

These things provide mutual aid and material benefits to others. Believe me, if I could afford to build apartments, I would be.

Reply on news.ycombinator.com