Zuckerberg weighed leaving California over billionaire tax, then struck a deal with Meta

Meta $META Platforms entered into an agreement with CEO Mark Zuckerberg on Oct. 19 that commits him to remain a California resident for eight years, after he told the company’s board he was evaluating a move out of the state over a proposed wealth tax.

Under the agreement, Zuckerberg must live in California, or in whichever other jurisdiction houses Meta's corporate headquarters, for as long as he stays on the executive team full time or serves as executive chair, Meta said in an SEC filing. The commitment has an exception for "material unforeseen circumstances."

In return, Meta's board declared a one-time dividend of one share of non-voting Class C stock for each Class A and Class B share. The company's charter change creating the new class takes effect Jan. 19, 2027. Zuckerberg is permitted to unload 20% of his Class C allotment, a slice equal to 10% of his economic ownership, to cover any bill that California Proposition 40 might produce, Meta said in a separate information statement. Meta said that would not affect his majority voting control.

The other 80% is "stapled." For each of those shares he sells, Zuckerberg must sell one Class A or Class B share or convert one Class B share into Class A, the filing says. Meta will release 2.5% of the dividend shares from that condition each quarter he meets the full-time requirement, until all are released after 32 quarters.

Meta said Zuckerberg told its special board committee he was weighing a shift of his main home out of the state. If Proposition 40 passes, Meta said, he could owe a "significant, multi-billion dollar tax payment." In July, Zuckerberg told a board member that selling shares to cover the tax could shrink his voting stake to roughly 53%. He held 60.6% as of Oct. 1, according to the filing.

Zuckerberg first asked for a dividend of 20 Class C shares per share on Aug. 4, then proposed four per share on Sept. 5. The final terms set one per share. On Sept. 9 he told directors he planned to list his Palo Alto home for sale on Sept. 13. He did not list it, according to The Wall Street Journal.

The special committee said Zuckerberg's "continuing presence at the Company's headquarters in California, is critical at this current inflection point for the Company and the tech industry." Meta also said the new stock gives it a way to raise capital without diluting voting power. Its long-range forecasts point to capital needs running into the hundreds of billions of dollars across a span of several years, starting as early as the autumn of 2026, the filing says.

Proposition 40 is on the Nov. 3 ballot. It would impose a single 5% levy on the wealth of California residents who hold at least $1 billion in assets, according to The Wall Street Journal. Political analysts say passage is far from certain, according to Reuters.