Patagonia founder donates his $3 billion company to fight climate change— and he still faced backlash

The impact of industrial pollution has brought the planet to a point when climate change is wreaking havoc in different parts of the world. While corporations have made promises to cut down emissions and others are buying carbon credits, Yvon Chouinard, the founder of clothing Patagonia gave away his firm's entire profits to fight climate change in 2022. But while his philanthropy was praised, some reports claimed that the plan actually helped the billionaire avoid $700 million in taxes.

Giving Away His Life's Work

Chouinard, who turned his passion for rock climbing into one of the world’s most successful sportswear brands, took to X (formerly Twitter) to announce that he had donated his $3 billion company to a specially designed trust and nonprofit organization.

Chouinard, his wife, and two children worked with teams of company lawyers to create a structure that allowed Patagonia to continue to operate as a for-profit company whose proceeds would benefit environmental efforts, The Guardian reported.

The company which was founded in the 70s, has been known for its focus on activism. Since 1985, it has donated 1% of its total sales to environmental groups through the One Percent for the Planet organization, founded by Chouinard. 

However, soon after his groundbreaking announcement, Net Zero Watch tweeted, that the billionaire's "last ditch effort" to protect the planet was saving him $700 million in taxes as well.

A Potential Tax Evasion Plan

According to a Bloomberg analysis, the structure of Chouinard’s deal allowed him to avoid the tax he would have paid if the company was sold. Furthermore, Chouinard told The New York Times that the family's voting stock which was 2% of all shares was being transferred to a new trust run by family members and advisers.

The rest of the privately owned company's stock, which is held by the family would go to a new nonprofit called Holdfast Collective. This reportedly means that his heirs will also avoid estate and gift taxes, while the family keeps control of the company.

As per The Times report, the family would have to pay $17.5 million in gift taxes, under normal circumstances. However, due to the structured deal, they would not have to pay any capital gains tax on the value that the stock has gained since the family first acquired it. Bloomberg estimated that this capital gains tax on the donation could have been about $700 million.

Justin Miller, national director of wealth planning at Evercore Wealth Management told Business Insider that there was a massive amount of stocks headed for the 501(c)(4) nonprofit, which was tax-exempt as well. He estimated that if 98% of the $3 billion donated had been subject to a federal gift tax, the amount owed by the Patagonia family would be about $1.176 billion including the 40% levy.

Thus, experts and people across the globe criticized Chouinard for coming up with a structure that allowed him to offload the company and "opt-out" of paying taxes. However, in a statement to Insider, a company spokesperson said that the billionaire founder had no intention of avoiding taxes. 

"Patagonia pays its taxes," the statement read. "We have at times advocated for increased corporate tax rates to support climate initiatives," it added. The representative also claimed that the company would be willing to pay a higher corporate tax as well to advocate for "stronger climate policies".