Patagonia owner giving away company for climate change avoids $700M tax hit
Not everyone was impressed by Patagonia founder Yvon Chouinard’s decision to transfer his ownership of the company to a climate change group.
After Mr. Chouinard received glowing reviews for his philanthropy, led by a New York Times exclusive headlined “Patagonia Founder Gives Away the Company to Fight Climate Change,” those crunching the numbers pointed out that the move offers considerable tax advantages.
“Patagonia founder Yvon Chouinard has described his decision to give away the company as his last-ditch effort to do all he could to protect the planet, however, it’s also helping him skirt around $700 million of tax bills. Funny that!” tweeted Net Zero Watch.
Declaring that “Earth is now our only shareholder,” the billionaire moved 100% of his nonvoting shares to the Holdfast Collective, a newly formed nonprofit dedicated to fighting the “climate crisis,” and all of his family’s voting shares to the Patagonia Purpose Trust, which his family and its advisers control.
The deal’s structure puts Mr. Chouinard in a position to save an estimated $700 million in federal capital gains taxes had he sold the $3 billion outdoor gear-and-apparel giant, as well as allowing his heirs to avoid estate and gift taxes while keeping his family in control of the company, according to a Bloomberg analysis.
The details shook the hero-of-the-environment narrative that characterized the coverage of Wednesday’s announcement, as fossil-fuel supporters and media figures on the left and right called attention to the tax benefits.
ProPublica senior editor Jesse Eisinger tweeted that The New York Times’ “paean to the Patagonia [founders’] machinations was erroneous. It’s a massive tax avoidance scheme,” while National Review dinged the “socialist billionaire who’s getting a sweet tax deal.”
A Patagonia spokesperson defended the arrangement, noting that Mr. Chouinard would pay about $17.5 million in taxes on the shares transferred to the Patagonia Purpose Trust. Those voting shares represent 2% of his holdings, while the nonvoting shares comprise 98%.