February 2, 2012; Source: MSNBC | Approximately 1,000 Facebook employees who received stock incentives to complement their salary will literally become millionaires overnight when Facebook goes public. What would you do if you became a multi-millionaire overnight? Pay off your college debt? Boring. Book a trip to outer space? Maybe. Some analysts, however, believe that you would give some of it to charity—though perhaps not right away.
To avoid capital gains taxes and to become eligible for income tax deductions, the new Facebook millionaires could donate some of their stock to a donor-advised fund or a charitable remainder trust. Or, these newly-donned millionaires could follow the example of Facebook’s very own billionaire CEO Mark Zuckerberg, who recently signed The Giving Pledge, a campaign started by Bill Gates and Warren Buffet to persuade America’s superwealthy to pledge at least 50 percent of their income to charitable causes.
Some charities will surely benefit, such as those who have included Facebook in their investment portfolio. For instance, The Nation has reported that one Hong Kong charity that has invested in Facebook will reap $340 million from the IPO.
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However, some experts—such as Robert Frank, a writer on culture and the economy of the wealthy for The Wall Street Journal—do not think that most nonprofits (who, on the whole, do not have Facebook in their investment portfolio) will see an immediate impact on philanthropic efforts due to the generally young age of many Facebook employees. He indicates that many of these young employees are still in the “accumulation phase” of life. Frank believes that, based on behaviors of giving over a lifespan, these employees will probably not start sharing their wealth until they are in their 50s and 60s—though he says that some of their wealth will likely be channeled to foundations for tax breaks.
Patrick Rooney, executive director of The Center on Philanthropy at Indiana University, predicts that any nonprofits that garner Facebook dollars are more likely to be mission-focused niche groups, rather than religious groups. With a decline in attendance for religious services across the country, Frank concurs that more people will be giving money to causes with which they personally identify.
Whatever the cause, Frank thinks it will be a long time before charitable gifts from Facebook’s overnight millionaires hit the bottom line for most nonprofit entities. What do you think? Will Facebook’s IPO millionaires be purchasing space flights to the moon or share their winnings to cure cancer? –Saras Chung