Mark Zuckerberg was running out of time.
A landmark tax on billionaires was looming on the ballot in his home state, California, and he needed the board of directors at Meta, his tech company, to take steps to protect him from it.
Mr. Zuckerberg had been negotiating with Meta’s board since July. Over dinner with board members on Sept. 9, he effectively gave them an ultimatum: If a deal wasn’t struck, he would sell his home in Palo Alto, and the listing would be public. He planned to put the home up for sale on Sept. 13, he said, giving the board 96 hours to avert a public-relations crisis.
Meta, which is based nearby in Menlo Park, scrambled for a solution. On Wednesday, the company unveiled the result: In January, it will issue a new class of stock to shareholders, which Mr. Zuckerberg can sell to pay the potential wealth tax without cutting into his 60.6 percent voting power at the Silicon Valley firm. It also helps the tech giant fund its enormous investments in artificial intelligence.
The back-and-forth between Mr. Zuckerberg and Meta was detailed in an extraordinary tranche of paperwork filed with the Securities and Exchange Commission on Wednesday. The filings pull back the curtain, in vivid detail, on how billionaires like Mr. Zuckerberg — whose net worth stands at $247 billion — are navigating the risk posed by California’s proposed tax. The filings also reveal Mr. Zuckerberg’s leverage over the board of Meta, a company he has been inextricably linked with since he founded it in his Harvard dorm room in 2004.
Meta declined to comment.
Mr. Zuckerberg’s decision to pre-emptively restructure his stock holdings shows how fearful Silicon Valley is that the tax measure, Proposition 40, might pass in the midterm election on Nov. 3. The proposal would assess a one-time 5 percent tax on all holdings of billionaires who lived in California as of Jan. 1, 2026.
At his estimated net worth, Mr. Zuckerberg, 42, could face a tax liability of nearly $12.5 billion. But even billionaires do not have those amounts of cash on hand. If he had to sell his existing Meta shares — known as “supervoting” shares, which give him more voting power at the company — to pay that tax, his voting power could be reduced to 53 percent, Meta said in the filings.
If Proposition 40 is voted through, litigation is almost certain, with some opponents expected to argue that it should not be applied to individuals who resided in the state before the tax was approved. Some of California’s richest individuals, such as the Google co-founder Sergey Brin, moved out of the state before New Year’s Day.
But no California company has taken such drastic steps to grapple with the possible tax as Meta.
On July 8, Mr. Zuckerberg began a series of conversations with some board members about restructuring Meta’s stock out of concerns that he would have to leave California like Mr. Brin. The board worried that if Mr. Zuckerberg, who is intimately involved in A.I. development, left the state and its A.I. researchers, that would harm the company’s progress.
On Aug. 4, Mr. Zuckerberg told the board that “he intended to establish residence outside California, which he had been advised he would need to do before the Nov. 3, 2026, election,” according to the filings.
Meta said that if Mr. Zuckerberg listed his Silicon Valley home for sale, it “would be public and inevitably noted and commented upon by company employees and, accordingly, raise questions for management of the company going forward.” If he then left California, the move would hurt the company just like the remote work caused by the Covid pandemic did, the filings said.
Around Labor Day, Mr. Zuckerberg told board members that he “would need to begin taking steps by mid-September in order to establish residency outside California by mid-October.” He began thinking of informing company management about his plans.
By Sept. 14, the outlines of a deal were reached. Mr. Zuckerberg will be required to reside in California for eight more years, according to a “Founder Alignment Agreement” made public on Wednesday, unless Meta moves, he is no longer in company leadership or there are “unforeseen circumstances.”
Mr. Zuckerberg splits much of his time between his Palo Alto home and another California residence on Lake Tahoe. He also owns property in Miami, Hawaii and Ireland.
In recent months, dozens of tech executives, including Mr. Brin, have piled over $330 million into a political group that is fighting the wealth tax, financing a barrage of advertising that some people believe has given opponents the upper hand. Mr. Zuckerberg has not spoken about the wealth tax publicly or donated to the effort to fight it.
Some Meta board members have, though. One of them, Patrick Collison, a founder of the financial technology start-up Stripe and a close friend to Mr. Zuckerberg, has donated $33 million. Another major donor on the board is Tony Xu, the chief executive of DoorDash, who was one of three members of the special committee that negotiated with Mr. Zuckerberg over the new stock plan.
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