In response to California’s upcoming “Proposition 40” (also known as the “California Wealth Tax”) set for a public vote in early November, Meta CEO Mark Zuckerberg has made it clear to the company’s board that he intends to move his primary residence out of California due to the potential tax bill of over a hundred billion US dollars. The board swiftly reached an agreement with him to keep him as a California resident.
To address the risk of the CEO leaving and governance issues, Meta’s board special committee submitted a statement to the U.S. Securities and Exchange Commission (SEC) on Wednesday, October 21, announcing an agreement they have reached with Mark Zuckerberg. Meta will issue a new class of non-voting C shares in January 2027, effectively a stock split of 1 for 2, allowing Zuckerberg to sell up to 20% of these C shares to cash out and pay off the potential massive tax bill. In exchange, Zuckerberg has committed to continue residing in California (or where Meta’s headquarters are located) for the next 8 years.
According to Reuters, Zuckerberg has a net worth of approximately $240 billion to $250 billion and holds about 60.6% of the voting rights in Meta. If he is forced to sell voting class B shares to raise taxes, his voting rights would decrease to around 53%. With the issuance of non-voting C shares, he can cash out shares equivalent to 10% of his total economic interest to pay taxes, while retaining complete control over Meta.
Fortune reports that Meta’s CFO Susan Li and the independent board committee pointed out that the new issuance of C shares not only provides liquidity for Zuckerberg but can also be used for public market financing, employee stock incentives, and corporate acquisitions, especially in raising the needed hundreds of billions of dollars for Meta’s ongoing AI research (such as Superintelligence Labs).
Proposition 40 proposes a one-time 5% wealth tax on California residents with a net worth exceeding $10 billion. The tax can be paid over 5 years and is based on the residency status as of January 1, 2026.
This tax proposal could raise hundreds of billions to over a trillion dollars from around 200 to 250 billionaires in California. According to estimates by The Telegraph, if the bill is passed, Zuckerberg could face a tax bill of up to $114.5 billion to $120 billion.
Fox Business reports that former Reagan administration economist Art Laffer and entrepreneur Eric Schiffer, among others, oppose this measure, warning that it could trigger a “mass exodus” of high-net-worth talent and entrepreneurs from California.
California Governor Gavin Newsom also opposes the proposition.
The results of the Proposition 40 referendum will be revealed on November 3, 2026. Current polls are still showing a close race. TrueDot polling indicates 46% support and 43% opposed; while Manhattan Research Institute polling shows 35% support and 50% opposed.
If Proposition 40 does not pass in the November referendum but Meta still issues C shares in January 2027 based on this provision, shareholders may question whether the board has overly accommodated the CEO’s personal tax considerations, leading to unnecessary restructuring of the company’s capital.