Media treat the Patagonia donation with kid gloves
DARK MONEY
I was interested by the New York Times story about Patagonia founder Yvon Chouinard giving away his company, so it could dedicate profits to fighting climate change in perpetuity. Naturally, as someone who thinks more billionaires should be using their money to fight climate change, I’m inclined to think such behavior is great. But the more I read of the subsequent commentary about how he gave his company away, the more I stopped approving of it quite so much.
He moved 98% of Patagonia’s shares to Holdfast Collective (not the same as the already-existing-but-different Holdfast Collective that makes military certificates, judging by the statement on its website), which is designated a “501(c)(4)” under the U.S. tax code and can make unlimited political donations. The family’s voting stock meanwhile went to the Patagonia Purpose Trust, which will decide the direction of the company and make sure it keeps doing what it should. The family and/or its nominees will control the trust, and thus retain control of the company’s direction and strategy. But they will no longer own it.
- “Instead of “going public,” you could say we’re “going purpose.” Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth,” said a statement from Chouinard.
- “I was in Forbes magazine listed as a billionaire, which really, really pissed me off,” he told the New York Times. “I don’t have $1 billion in the bank. I don’t drive Lexuses.”
The article was remarkably generous about the plan and treated Chouinard throughout as the national treasure that he is, but I was struck by one aspect, which is that the Chouinard family will pay just $17.5 million in tax on the gift, which doesn’t seem like very much for a transaction worth around $3 billion. I was not the only person to notice this little wrinkle.
Law professor Daniel Hemel pointed out that a gift of this nature would incur a tax bill of $1.2 billion if given to a purpose rather than a purpose-created entity, and he compared the structure of the deal to one from Republican donor Barre Seid, who also gave away his company to a 501(c)(4), and thus avoided a huge tax bill on his unrealized capital gains. Seid’s money went to the Marble Freedom Trust, which is run by the co-chairman of the Federalist Society. But he did not get a generous write-up in progressive publications. Quite the reverse.