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Facebook Gets a Multibillion-Dollar Tax Break

Posted By yihan On February 17, 2013 @ 6:26 am In Money Watch | Comments Disabled

Peter Coy
Businessweek.com [1]
February 17, 2013

It hasn’t drawn much attention, but Facebook’s first annual earnings report contains an accounting gem: a multibillion-dollar tax deduction for the cost of executive stock options and share awards.

Even though Facebook (FB) reported $1.1 billion in pre-tax profits from U.S. operations in 2012, it will probably pay zero federal and state taxes—and even receive a federal tax refund of about $429 million—according to a Feb. 14 statement from Citizens for Tax Justice.

The tax-research and -lobbying organization says companies such as Facebook should treat stock options the same in their reports to shareholders as they do in their tax filings. Citizens for Tax Justice calls the tax footnotes in Facebook’s Jan. 30 financial statement “an amazing admission,” but there’s nothing illegal about the breaks the company is claiming. Companies like Facebook are allowed to treat the cost of non-cash compensation, such as stock options, as an expense that reduces profits, essentially the way they treat cash compensation such as salaries.

The difference is that Facebook—unlike, say, General Motors (GM)—relies heavily on stock options and restricted stock units as a form of compensation. It paid out a lot during its years as a private company that it must now recognize on its income statement and balance sheet.

Full story here. [1]

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URLs in this post:

[1] Businessweek.com: http://www.businessweek.com/articles/2013-02-15/facebook-gets-a-multi-billion-dollar-tax-break

[2] Iraq, China ink multibillion-dollar deal: http://www.prisonplanet.com/iraq-china-ink-multibillion-dollar-deal.html

[3] And Now Facebook’s Bankers Are Divvying Up The $100 Million They Made Shorting Facebook’s Stock: http://www.prisonplanet.com/and-now-facebooks-bankers-are-divvying-up-the-100-million-they-made-shorting-facebooks-stock.html

[4] Startup dumps Facebook: ’80% of ad clicks came from bots’: http://www.prisonplanet.com/startup-dumps-facebook-80-of-ad-clicks-came-from-bots.html

[5] Senators push for investigation into Facebook password requests: http://www.prisonplanet.com/senators-push-for-investigation-into-facebook-password-requests.html

[6] Facebook denies aiding spy program: http://www.prisonplanet.com/facebook-denies-aiding-spy-program.html

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