Patagonia founder Yvon Chouinard described his decision to give away the outdoor apparel maker as his last-ditch effort to do all he could to protect the planet. The deal is structured in ways that also bring the billionaire other perks by letting him and his family keep control of Patagonia while shielding them from tax bills that could have totaled hundreds of millions of dollars. By donating most of the company, valued at $3 billion according to the New York Times, Chouinard is at the fore of a small-but-growing movement among the ultra-wealthy to use nonprofits to exert political influence long past their lifetimes.
According to a statement on Wednesday, Chouinard, 83, transferred 98% of Patagonia shares to Holdfast Collective, a nonprofit that will deploy its roughly $100 million in annual profits "to fighting the environmental crisis and defending nature." He moved all of his family's voting stock, equal to 2% of its total shares, to an entity called the Patagonia Purpose Trust.
While many billionaires make living donations with tax and estate planning as the primary considerations, Chouinard seems to have structured his Patagonia transfer with at least a few purposes in mind. Holdfast is a 501(c)(4) nonprofit that can make unlimited political donations but is not eligible for income-tax deductions. In addition, the Patagonia founder will owe $17.5 million in gift taxes for the shares he transferred to the trust. Still, the moves mean Chouinard will not have to pay the federal capital gains taxes he would have owed had he sold the company. It also helps Chouinard avoid the U.S. estate and gift tax, a 40% levy on large fortunes when transferred to heirs.
Donating to a foundation or other 501(c)(3) nonprofit could have brought even more tax savings, but U.S. rules make it difficult for those organizations to own private businesses. Using a 501(c)(4) and trust lets Chouinard and his family continue to effectively control the company.
It is unclear to what extent Chouinard's Holdfast nonprofit will get involved in politics since the issue of climate change is broad and could entail lobbying for legislation or apolitical charitable work. With a historically polarized government leading to repeated stalemates on legislation, more billionaires will likely see 501(c)(4)s as the most expedient way to ensure their policy aims and charitable intentions outlive them.
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