Yvon Chouinard, the founder of popular clothing brand, Patagonia described his decision to donate his wildly successful outdoor clothing company as an effort to do his part to protect the planet. However, there are also other benefits based on how the deal was structured; including letting him and his family keep control of the company, while also protecting them from tax bills that exceed hundreds of millions of dollars. This decision comes in the midst of a small, but growing movement among the ultra-wealthy who are using nonprofits to wield political influence well past their lifetimes.
Why Not Just Sell the Company?
Chouinard transferred 98% of his shares in the company to Holdfast Collective, a nonprofit that will use the almost $100 million in annual profits towards “fighting the environmental crisis and defending nature,” according to a statement made last Wednesday. He moved the rest of the shares (2%) to an entity called the Patagonia Purpose Trust. “As the business leader I never wanted to be, I am doing my part,” Chouinard said in the statement.
The move also means that Chouinard will not need to pay the hefty federal capital gains tax that would have come with selling a company worth almost $3 billion, which he said he did strongly consider before ultimately deciding to donate 98% of the shares. The sale of the company would have equated to a tax bill worth upwards of $700 million.
Patagonia’s Response
The company didn’t respond to multiple requests for comment about the tax implications of the deal. However, Chouinard said in his statement that the decision was “created to protect the company’s values” of preserving nature through business practices. It is difficult to say whether or not this decision made by Chouinard will have any political impact since the climate change issue is extremely broad and could entail a multitude of different things like lobbying for legislation or unpolitical charitable work.
Wrap Up
This move by Chouinard is not new as similar tactics have been used before to reduce the hefty tax bills that come with selling a multi-billion dollar company. Whether or not Chouinard made this move with a genuine interest in helping the climate, or just for the $700 million tax break may never be known, but we do know he escaped a huge tax payment.