Facebook Gets a Multibillion-Dollar Tax Break

Peter Coy

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 article continues at Businessweek.

H/T Instapundit where there’s this: How a dream team of engineers from Facebook, Twitter, and Google built the software that drove Barack Obama’s reelection.

Related: The Creepy Details of Facebook’s New Graph Search

…Facebook’s Graph Search presents the problem of discoverability. One can have a good balance of privacy and openness if information is available, but not easily discoverable. You might not mind if people specifically interested in you look at your Likes, but you may not want to have a market researcher pull the list and add it to an ad targeting profile. You might be okay if a new person you met at a conference looks you up on Facebook, but you may not want a creepy guy searching through Facebook’s loose networks to find someone to stalk. All of a sudden, what people once thought was shared only to their Facebook audience—whether friends, friends of friends, or member of the public with a specific reason to look you up—is now readily available via Graph Search. This feature has rolled everyone, by default, into a dating service (“Single females in San Francisco who like Radiohead”) and a marketing database (“People under 25 who like Coca-Cola”)…

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