Facebook Gets a Multibillion-Dollar Tax Break

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.

You won’t find any $429 million tax refund in Facebook’s financial statements. Indeed, the company says it had a $559 million federal tax liability in 2012. But that liability isn’t an actual payment. In a footnote, the company also said that it had a $1.03 billion “excess tax benefit” last year related to “stock option exercises and other equity awards.” That benefit is what flips the federal tax liability into a refund. (A small portion is applied against state taxes.)

Facebook says that it anticipates reducing its tax liability in the future by an additional $2.17 billion by using further net operating loss carry-forwards that it has banked.



  1. dusanmal says:

    “there’s nothing illegal about the breaks the company is claiming” – rabid redistributing Progressives strike again. Is it legal – yes. You don’t like it – try to change the law not malign law abiding corporation. And “fair share” as defined by these idiots is more Orwellian than the whole 1984 newspeak.

  2. Tired Tired Tired says:

    Tax loopholes should be closed by tightening them around the necks of those in Congress who wrote and enacted them into law.

    When loopholes are exposed, can’t these be traced back to the individual rat bastards responsible?

    Make them answer up by admitting the loophole was intentional (jail time) or declaring their incompotency (mandatory dismissal).

    • Tricky Dick says:

      Hell ya!!!

      When loopholes are exposed, can’t these be traced back to the individual rat bastards responsible?

      Where’s our press with the FULL story?!

      It’s amazing we will probably never know who the “rat bastards” were since it’s almost a guarantee that they were Republicans. Or were they?!!! The fact that the press isn’t saying really makes you wonder.

  3. Egon Ruuda says:

    It is because all* those profits are fake. I know no-one that admits to ever buying anything via facebook or even clicking the links. Either they are liars or facebook is. And i would bet that those earnings are higly inflated anyways.

    *all as in most and won by trade deals with the stock which in itself is an legal way of making money, just not real profit.

  4. sargasso_c says:

    I get a headache just trying to understand the US tax system.

    • Boss Dicky says:

      That’s because most of it deals with incomes where most of the tax code is plain outright ILLEGAL!

      But then, who gives a shit about Constitutional Rights or anything?

  5. Uncle Patso says:

    Hmmm — I never thought of Business Week as “rabid redistributing Progressives”. Whaddya know — you learn something every day.

    I find it hard to be outraged. Awarding stock options does actually cost the company and does actually decrease overall profit. Unless the tax benefit is greater for granting stock options than for paying wages and salaries, rents and leases, etc., what’s the big whoop?

    • bobbo, one true Liberal recognizing Obama is too far Right says:

      I agree. While advanced tax often fools me, it looks like the first business deduction is as valid as if cash had been paid. But the “unfairness” may (I say may) arise with the recipients as it is STOCK options or stock they are getting which involves capital gains rather than regular income. IOW–tax breaks for the RICH continue.

      Not clear to me how this deduction turns into a surplus that is paid by taxpayers back to Facebook. I could study that, but its such a nice day, why piss myself off?

  6. Dallas says:

    Like Mitt Romney , that’s how the 1% concentrate and grow their wealth and power – via loopholes that allow their huge sums of wealth get transferred without being taxed.

    This is why Mitt Romney didn’t want to be paid in “messy income” like the sheeple that voted for him.

    • Bailout Bob says:

      So no “change”…imagine that!

      • Boss Dicky says:

        PALEEEEEZZZZE! “Dumb Ass” is about as intelligent as a fence post! Read his comment again. So please don’t encourage him with any more replies. (Ya, I know what I just did – but someone had to.)

    • pedro says:

      Damn!

      Who left the toilet’s lid open for DUHllass to come out?

  7. Admfubar says:

    While it may not be illegal… i is immoral!

    • Boss Dicky says:

      Why?

      It’s a simple question! Why is it immoral to want to keep what you EARN?!

      I’m not defending Facebook! Don’t get the wrong idea since I too don’t exactly see them as having “earned” anything. Because earning usually means someone would have had to WORK for it.

      But once they get their money LEGALLY then why is it “immoral” for them to want to keep it? Why should they give/pay it to an IMMORAL government especially when they already paid what the government required of them?

      The problem isn’t really with Facebook. THAT’S THE POINT! (See if you can fill in the blank.)

  8. Ken says:

    If corporations are not to have a voice in politics, and therefore no representation, why is it right that they pay taxes?

    • orchidcup says:

      Most campaign funds flow from corporations either directly or indirectly through PACs or Super PACs.

      Corporations are represented in D.C. by lobbyists that are flush with corporate money.

      It is the average person that gets no representation in government.

    • Boss Dicky says:

      I agree with orchidcup!

      If you don’t think corporations have a voice in politics then you have your head buried.

      Corporations have a much bigger voice than entire districts of voters. Orchidcup points it out rather bluntly but the point is correct. Corporations RULE politics! And they do it with the MONEY that we (public idiots) pay them (the corporations) when we buy those fancy new iPhones or fill up our cars with gas or make nearly any other purchase.

      Corporations simply sponsor congressional candidates to run for office through the use of things like PAC funds. But to call a Congressman a public representative is really more of an oxymoron since almost all Congressmen don’t really represent the public at all. Congressmen/Congresswomen are really there to represent and protect the corporations that helped PAY to get them into office. And MAYBE make sure that not too many “voters” get hurt which really just upsets the money flow.

      So if you think you have a voice in politics, you’re sadly mistaken. The only voice you have is a “WE” voice when you assemble with others and go marching with pitchforks or something. The only other way to have a voice in politics is with MONEY like denying paying it to the evil corporation’s who use it to pervert politics. But good luck there when everyone has the mindset that their new iphone or other brand new turd isn’t really doing anything bad when they make their purchase.

      So does it now come as such a surprise that those in power don’t really want you or any common “citizen” to hold on “their money”?!

    • Dallas says:

      Oye. I think I just thru up a little.

  9. ± says:

    This is simple government tithing. In return they get access to the database without lawsuits etc. Why so many words to type? … sheesh.

    Thank you RD-hiring-sheeple.

  10. ubet426 says:

    This points out exactly why a flat tax would be so beneficial. Screw all the deductions and chip in your 15% or whatever it would be. I don’t begrudge companies and individuals for taking advantage of the system laid out before them. But the system sucks!

  11. Sarah Park says:

    The US tax system is really confusing.

  12. WmDE says:

    More Bloomberg than BusinessWeek.

    A bad article about nothing.

    I don’t mind that Apple board member, Al Gore, received $29,500,000 worth of Apple stock for $441,000 for a paper profit of $29,059,000. I assure you that somewhere on Apple’s books that shows up as an expense.

  13. Peppeddu says:

    Well…
    FB doesn’t pay taxes on stock options is giving away (because it’s treated as cash compensation)
    Then whomever is receiving those stock options should pay taxes (because it’s treated as cash compensation)

    If that’s the case I don’t see any problem whats so ever.

    • WmDE says:

      Then whomever is receiving those stock options should pay taxes (because it’s treated as cash compensation)

      Eventually. Al Gore buys $29,500,000 of Apple stock for $441,000. On his books he just spent $441,000, an expense. He will not be taxed until he “realizes” his gain. Until he sells the stock his profit has not been made.

      There is some consolation in that he has “lost” a couple of million on the market value of his Apple stock since he acquired it on Jan 15th. (Sour grapes.)

      Al has the additional problem of having to avoid headlines like “Board member, Al Gore, dumps Millions in Apple Stock”

      • Dallas says:

        There’s something called AMT that I believe Al should be paying now even when gain is not realized by the sale of those securities.

        Not that I agree with the AMT system but the 1% want little to do with income. Like Willard Romney, they like tax evasion friendly securities instead.

        • Mextli says:

          I think minimum wage employees will fall under AMT soon.

        • WmDE says:

          Just read the wikipedia article on the AMT.

          My head hurts.

        • Mr Diesel says:

          I doubt AMT applies in Algore’s case but it sure fucks over people like me. It has eventually crept downward to the point where hits people making less than $100k.

          • LibertyLover says:

            That was the goal. They knew when they implemented it that inflation would soon bring everybody under the tent.

  14. Glenn E. says:

    This is what they really learn in these business degree colleges. How to avoid paying taxes, whenever possible. Then all their alumni have to do it luck out picking a niche business, that takes off. And they’re all set on diverting funds and profits, from the taxable income stream, to the liabilities stream.

    It like the old saying, “one man’s trash, is another man’s treasure”. Only in this case it’s “one company’s liabilities, is anyone else’s income”.

  15. The0ne says:

    Gotta love the lopeholes. I just wanted get to where I can use them as well! :)

    • LibertyLover says:

      You can do it now.

      If you use your vehicle for work but aren’t compensated by your employer, you can deduct part of it from your taxes.

      If you have a dress code and your employer doesn’t reimburse for keeping it in good shape, you can deduct that, too, along with tools and any other items of the trade.

      Warren Buffet deducted his bicycle when he had a paper route as a kid.

      There are lots of ways make use of them. All you have to do is have the initiative to look them up.

  16. Sea Lawyer says:

    lol, issuing stock options is an expense?

  17. Guyver says:

    Get rid of income tax and go to a fair tax. The p3nis envy whining over who’s “getting over” on taxes will stop.

    Problem solved.

    • LibertyLover says:

      Never happen.

      There isn’t a politician with a hair on their ass long enough to push through this kind of change. Too much sunlight is bad for horse trading.

  18. more nonsense in the comments section.

    all you guys do is blame liberals for all of the ills of the world. it’s small minded and ridiculous to blame one group for all the ills of the world simply because you disagree with them. but what else would i expect from the followers of this page? hatred of the other disguised as libertarianism is a big thing these days, not just on this page but on the “new right” in general.

    more circle jerking unfortunately

    • LibertyLover says:

      It’s not just liberalism but conservatism, too.

      How do you explain the lack of social mores today? At one time people would be ashamed to accept government assistance. Now welfare moms have extra kids just to get that extra check and they aren’t concerned about not having a father around — why bother? The government fills that role now.

      When 2/3 of the government budget is spent on welfare programs, it’s time to rethink what’s fair and what isn’t.

  19. Somebody says:

    Its just one of the little perqs that comes with being a CIA front company.

    That and you get to wear an Illuminati t-shirt.

    Only the little people pay taxes. — Leona Helmsley

  20. Supreme Ultrahuman (I see the comment system is still designed for retards.) says:

    There is nothing on Earth that is so important that our overall taxes should go up – they’re already too high. Anyone who votes for a candidate that proposes raising taxes should have to declare they did so so their taxes can be doubled. They could have no copmplaints since they support higher taxes. That’s only fair.