February 18, 2013
Facebook to Get $429 Million Tax Refund Despite $1.1 Billion in U.S. Profits
Earlier this month, the Facebook Inc. released its first “10-K” annual financial report since going public last year. Hidden in the report’s footnotes is an amazing admission: despite $1.1 billion in U.S. profits in 2012, Facebook did not pay even a dime in federal and state income taxes.
Instead, Facebook says it will receive net tax refunds totaling $429 million. Facebook’s income tax refunds stem from the company’s use of a single tax break, the tax deductibility of executive stock options. That tax break reduced Facebook’s federal and state income taxes by $1,033 million in 2012, including refunds of earlier years’ taxes of $451 million.
- Bloomberg, Facebook Gets a Multibillion-Dollar Tax Break
- Board Advisory, Facebook’s Multi-Billion Dollar Tax Break
- Business Insider, Here's Why Facebook Is Getting A Refund On Its Income-Tax Bills
- Daily Mail, Facebook to Pay NO Tax For 2012 and Will Even Get Tax Refund of $429m Despite $1BN Profits
- Forbes, How The Tax Code Grew To 70,000 Pages: Dems Seek To Limit 'Facebook' Deduction for Stock Based Compensation
- Fox News, Facebook Paid No Taxes Despite Record Profits
- Huffington Post, Facebook Paid No Income Taxes In 2012
(Hat Tip: John Stanley.)
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CTJ: Facebook’s income tax refunds stem from the company’s use of a single tax break
When the whiny, sniveling leftists at the intentionally misnamed Citzens for Tax Justice claim some injustice, which is typically reserved for corporations and executives, you can be sure that they are leaving out a lot of pertinent facts. The organization, which doesn't pay taxes itself, gets the headlines while conveniently omitting that there were entirely legitimate NOL carryforwards applied by Facebook, that ordinary taxes were paid by the executives receiving the options and exceeding the company's tax savings from the deduction, and that the refunds were due to overpayments. Oh, and deductions for loss carryovers and executive compensation are normal deductions from income and not "tax breaks." The Citizens for Tax Justice is agenda driven and is either incompetent or knowingly lying.
Posted by: Woody | Feb 18, 2013 11:38:42 AM
The refunds weren't due to overpayments. They were due to the company carrying back net operating loss carryovers and getting refunds of taxes it paid in previous years. The loss carryovers were created by the stock option deduction - a deduction for which the company is out not one dime. Why should it get a deduction because the executives had income? They didn't pay the income to the employees. The stock market did.
Posted by: Codehead | Feb 19, 2013 4:18:53 PM
Of the refund, $429 million was related to the current year.
Why should the executives claim income and pay taxes if the company doesn't get a deduction? See I.R.C. § 83(h).
Why should companies get a deduction without a cash outlay? Well, why should companies pay tax on income it hasn't collected from Accounts Receivable?
The stock market paid the income? Get real. What entity created the wealth? Oh, that's right, "You didn't build that. Someone else did."
Don't blame Facebook for following both the Tax Code and reporting requirements, which are different, and having to claim four years of previously issued tax units all in one year. But, you can blame Congress and the President for making book and tax income different.
Posted by: Woody | Feb 19, 2013 7:43:55 PM
Accounts receivable represent income that will be received in cash. The stock option deduction will never be paid in cash.
I don't think CTJ was trying to "blame" Facebook. It's quite clear the point of their report is that Congress needs to change the law.
Posted by: Codehead | Feb 19, 2013 9:06:05 PM