Final week, Netflix cofounder, government chairman, and former CEO Reed Hastings gave about 40% of his firm inventory—price about $1.1 billion—away as a present. An SEC filing from Jan. 24 exhibits Hastings giving the two million shares to an unnamed entity. The submitting features a transaction code marked “G,” which signifies a “bona fide gift.”
It’s a stunningly giant donation, not simply Hastings’s largest ever, however representing one thing like 20% of his web price. After this donation, Hastings is price an estimated $4.1 billion, per Forbes, much of which is tied up in his remaining possession of just below 3 million Netflix shares by his household belief, price roughly $1.7 billion.
Hastings, alongside together with his spouse, Patty Quillin, has lengthy supported an array of charitable initiatives, together with a present of $120 million to the United Negro School Fund and two traditionally Black schools in 2020. Hastings and Quillin have additionally signed Invoice Gates and Warren Buffett’s Giving Pledge. However due to its construction, this explicit contribution doubtless comes with stunningly giant tax financial savings.
The present went to the Silicon Valley Neighborhood Basis (SVCF), a charity geared at addressing systemic inequalities within the Bay Space, a Netflix spokesperson told Bloomberg, which was among the many first to report on the donation. The present will doubtless be used within the basis’s initiatives for reasonably priced housing, childhood improvement, and catastrophe reduction, amongst different causes.
SVCF is a well-liked vacation spot for the world’s philanthropic tech billionaires; Twitter founder Jack Dorsey is a donor, and Meta CEO Mark Zuckerberg and Priscilla Chan, his spouse, have given $1.5 billion to SVCF, Variety reported.
The importance of a donor-advised fund
The Wall Street Journal reported on a unique cause for this charity’s reputation, particularly with Northern California tech luminaries: privateness and the largest doable tax break. The inspiration affords “donor-advised funds” that permit figures like Hastings to each donate and advise particularly on how the donation can be used.
There’s a long-standing profit within the U.S. tax code with donations as, relying on the donor’s bracket, the deduction towards present earnings can go as excessive as 30%. This enables the donor to keep away from capital-gains tax on appreciation of fairness investments. And giving to a donor-advised fund sponsor, like SVCF, can imply 50% financial savings, Ray Madoff, a Boston School regulation professor who focuses on philanthropy, taxes, and property planning, advised the Journal: “By taking your property instead of cash, they’re maximizing your tax benefits.”
It’s not clear what deduction Hastings will get, to make certain, however there are three major tax advantages individuals stand to achieve for his or her charitable giving. The primary: If they offer money, they will offset their earnings (though this solely applies to individuals who itemize their deductions, which lower than 10% of the inhabitants does). Profit two: For those who give appreciated property, as Hastings did, you received’t should pay that capital positive aspects, which saves one other 20% in taxes. Third: You may rise up to 74% tax profit for a charitable donation. In different phrases, a $100 million donation can in the end save a tax payer as much as $74 million.
Hastings isn’t the one billionaire freely giving a lot of his wealth. Final yr alone, MacKenzie Scott just lately revealed, she unloaded a quarter of her stake in Amazon—price over $10 billion—and he or she has lengthy made clear her dedication to offer most of her fortune away.
And Mark Suzman, CEO of the Gates Basis, told Fortune final week that the charity intends to spend its complete endowment inside 20 years of Invoice and Melinda Gates’ deaths. “But we are actually having active discussions in our board about whether we might want to potentially even accelerate that a little bit,” Suzman mentioned.
Hastings stepped into his government chairman function at Netflix final yr, following 25 years as its chief government. The streaming big is at present helmed by co-CEOs Ted Sarandos and Greg Peters.
