Patagonia’s billionaire founder, Yvon Chouinard, is giving away his company to further his climate agenda; however, his donation could allow him to avoid paying over $1 billion in taxes while still keeping influence over the clothing company.
Chouinard announced Wednesday that he was giving Patagonia away to “save our planet” and use the company’s revenue to fund environmental conservation efforts. However, Chouinard could avoid paying up to $1.176 billion in gift taxes by donating his business to a nonprofit organization, according to Business Insider. (RELATED: The Democrats’ Climate Bill Will Soon Let Corporations Pay Even Fewer Taxes)
Chouinard donated 98% of Patagonia’s total shares to an organization called the Holdfast Collective, a 501(c)(4) social welfare organization that will be tax-exempt. He could have been taxed 40% of $2.94 billion, which is 98% of the company’s valuation, if he had not donated Patagonia to the collective.
“There was never an ask from anyone in the Chouinard family that we create a structure to avoid taxes,” a Patagonia spokeswoman told the Daily Caller News Foundation. “There are no estate or capital gains taxes because there are no generational gifts or death, and there was no sale.”
Chouinard also created the Patagonia Purpose Trust “to protect the company’s values” and moved his 100% of the company’s voting stake, which is 2% of total shares, into the trust, which will allow his family to control the company’s board of directors, according to Bloomberg.
Donating 2% of the company’s shares into the trust means that Chouinard could still be required to pay $17.5 million in gift taxes. He could also avoid paying up to $700 million in federal capital gains taxes that he would have paid if he sold Patagonia instead of donating most of it to a nonprofit and transferring 2% of it into a trust.
Chouinard did not donate his company to a 501(c)(3) nonprofit as even though such a decision could have allowed him to pay even fewer taxes, it would not have allowed his family to maintain control of Patagonia, according to Bloomberg.
NEW YORK, NEW YORK – SEPTEMBER 14: A Patagonia store signage is seen on Greene Street on September 14, 2022 in New York City. (Photo by Michael M. Santiago/Getty Images)
The Holdfast Collective will invest its $100 million annually toward “fighting the environmental crisis and defending nature,” according to Chouinard’s statement. The charitable donation also means that Chouinard will not have to pay the federal estate tax, which taxes estates over $1 million by 40% when they are bestowed to heirs, according to Bloomberg.
Chouinard founded Patagonia in 1973 and pledged to give 1% of the company’s profits to help the environment. Patagonia calls climate change an “existential threat” to humanity and claims that carbon neutral goals or net-zero emissions are not enough to save the planet, according to its website.
Patagonia and Chouinard oppose the use of fossil fuels as they are concerned that carbon emissions produced from those fuels contribute to climate change. But many of Patagonia’s products like its fleeces and shorts are made from polyester and nylon, which are petroleum-based materials.
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