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STATUS UPDATE

Facebook Will Pay No Federal Tax and Get $429 Million Rebate

After $1.1 billion profits, company claims $1.3 billion tax break

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by Mary Noble

Senior Editor t

Image: BFree News

We're used hearing this sort of thing about corporate behemoths like General Electric and CitiGroup. But now one of America's most successful new companies is doing it too.

Facebook made $1.1 billion profits in 2012 and will pay less than zero in net federal taxes, according to Citizens for Tax Justice. What's more they'll get a tax refund of $429 million.

Of course, this is perfectly legal. Facebook is exploiting a loophole widely used by Silicon Valley companies to claim a $1.03 billion tax break. Many Facebook employees receive a big chunk of their compensation in stock options. FB can count the stock options as an expense that reduces profits, in the same way that regular salaries reduce profits, and thus reduce their taxable income dramatically.

The company plans to reduce its tax liability "by an additional $2.17 billion" in subsequent years, reports Businessweek.

Via Gawker.
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Is Facebook's tax refund to high?

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Comments (view in Forum)

  • AntiPorcheria
    !
    LOL! Zuckerberg, Jobs and all the "progressive" darlings suddenly become "capitalists" when the public looks at their pocketbooks. Of course, most of the sheep that care about this kind of thing FOR A MOMENT will "share" their opinion on Facebook with their iPad.
  • GmanGSW
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    @AntiBullshit
    LOL! I had to post it because it is SO insane! I also like the way you put it... unfortunately. No, not you, that they are able to get SUCH a HIGH return, given who they were/are... Actually, I don't like Facebook & nope, don't keep a "page" on their "Facebook," either.
  • marine1
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    If this doesn't speak volumes for tax reform nothing ever will. No person or corporation should get any kind of a tax return in excess of what they paid in.
  • DrFunkenstein
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    The country will never recover until the people take back the country from the billionaires and corporations. Sadly, most people don't realize they are doing the bidding of the billionaires and corporations(*cough* teabaggers).
  • drpeeper
    !
    LOL Sadly, most people don't realize they are doing the bidding of the multi trillion dollar debt,Trillions in unfunded liabilities and crony statism (*cough* progressives). "tea-bagging"?(That, of course refers to the cocktail hour at Barney Frank's condo in Georgetown.)
  • kathyparsell
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    @Keyjo
    I for one am glad to hear that, I was momentarily disappointed at your blinders. They collective are screwing us. And this disenfranchisement leads to distrust and yes to violence.

  • View all 12 replies >

  • MarkJM
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    @armed_liberal you're probably right. Let's just make the rich individuals pay more...oh wait, their money is in the Caymans as well...
  • justapirate
    !
    Ya know, it's difficult hearing that American businesses are taxed at too high a rate and then seeing stories like this almost daily. It's disgusting and insulting to Americans that have to live in the real world.
  • justapirate
    !
    @Keyjo My first response would be,"Yeah, I agree" but you'll probably find quite a few Dems in the Facebook Political Divvy Fund, too.
  • stepped_in_it
    !
    Yeppers.....one of the many tax loopholes I'll close when elected Prezident of the Very Tired States.......Send your campaign contributions to : Mr. stepped_in_it PO Box Here, Da ole USA, Zippity-do dah!
    Ya'll have a nice day!
    PS: I promise a gun in every stock pot! <walleye grin>
  • u
    Chromalord
    !
    Well the bigger question for me, is do the employees pay taxes on the stock options? It would seem they do if they are receiving them in lieu of salary, admittedly Im ignorant on this, I mean isn't income- income? If so, then what's the real difference if the tax revenues are parsed out amongst its employees instead of lumped into one tax from the company? I'm not for unfair loopholes but Net-Net, this one sort of makes sense to me.
  • u
    Chromalord
    !
    @stepped_in_it Yes, Dividends are income but you cant pay bills ( or live) on options. Their salary must be from dividends, I guess?
  • u
    metre
    !
    @Chromalord et all...

    Here is a general breakdown of how "options" are, or more than likely in this case for the RECIPIENTS/EMPLOYEES, NOT taxed.(Sorry its a bit lengthy but it IS tax information right! THAT is NEVER short! LOL)

    "The first thing you need to know is whether your options are non-qualified stock options (NSO) or incentive stock options (ISO). Your employer can tell you which kind you have.

    Non-Qualified Stock Options

    Unless you are in upper management, chances are you received non-qualified stock options. Don’t worry,“non-qualified” is not as bad as it sounds. It only means you don’t get all the breaks recipients of incentive stock options do. You still don’t have to worry about paying tax when you initially receive the options or when they are vested (when the options are actually yours).

    Exercising non-qualified stock options can cost you money, however, at least in the short run. Stock options have a set price at which you can buy stock, called a “strike price.” Say your strike price is $1 per share, and you wait until the stock is $1.50 per share before you exercise your options and buy 100 shares at $1 each. You’ll pay ordinary income tax on the difference between strike price and market value ($1.50 –$1.00 =.50). On 100 shares, that’s income of $50.

    Here’s the catch: If you don’t have enough money from other sources to pay tax on the $50 bargain element from exercising your stock options, you may have to sell some of your stock. If you have not held the stock for one year since you exercised the option when you sell it, you then have to pay short-term capital gains rates on any gain from the sale of the stock.

    On the other hand, if you can hang on to the stock you bought by exercising your options for more than one year, you’ll qualify for long-term capital gain rates on any profit from the sale.

    Incentive Stock Options

    Incentive stock options (ISOs) get preferential treatment by the IRS. You do not owe taxes when you receive incentive stock options, just the same as if you had received non-qualified options. However, when you exercise incentive stock options, you still don’t pay tax, either–even if when you exercise your options the stock is worth far, far more than your strike price. Only when you sell the stocks do you pay tax."

    Thanks to Sally Herigstad, Finance Expert @ helpicantpaymybills.net

    Thus 'options' are different than say... business expenses that the company pays for you, takes a tax write off for, and THEN adds to YOUR income and the IRS taxes YOU on i.e. housing/moving expenses. In the case of 'options' they are not actually giving you anything of value, so to speak, other than an agreement.. or contract. It would be like signing a contact for your job. You don't get taxed on the agreed upon salary/benefits UNTIL you actually receive them.
    Now IF the company gives you actual 'stocks' versus 'options' then they get a tax write off and you get the tax bill regardless of whether you sell them or not. AND you will be taxed at the market value.
  • Mr_GO_HERD
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    EVERYONE from big companies to Joe Schmoe on the street take advantage of tax loopholes to save money. The only reason people don't like what Facebook and other big companies get is because its such a large figure. Get over it. If you don't like the set up petition your congressman or run for office. It's all out there for you to do.
  • u
    Libertyiskey
    !
    I think the difference here is that Facebook isn't going to be paying any income taxes so this refund is coming out of our pockets, yours and mine.
  • PayThatCEO
    !
    Therein lies the problem. If we have huge corporations finding every opportunity to avoid taxes and if we have every small business owner finding every opportunity to avoid taxes...whose left to pay taxes?

    The working schmucks who have no choice but to pay because their employers are forced by law to remove taxes from their paychecks. We working schmucks can't possible support the entire country. Hence, the nation is collapsing because one third of the country doesn't pay taxes, another third finds ways to not pay taxes and the last third is quickly running out of steam.
  • frigginhell
    !
    The system is rigged. The more you have the less you pay. Regardless of what the whiners say about the rich paying most of the taxes. They pay far less of the tax burden in proportion to the amount of wealth they control. You get the justice you can afford in the courts and in the banks. It's always been like that it will always be like that. It's just now the stark contrast is so glaringly bright it blinds you. Time to put a guillotine out in front of the house of reps and remind them about what happend in france a couple hundred years ago.
  • jessejaymes
    !
    @PayThatCEO Here's the situation. The Far right will tell you that "the rich pay 70% of the taxes as it is". That may be true. But if the rich were to pay an honest 25% which is about what the middle class will pay, then tax revenues would quadruple or more. But I don't think the wealthy pay 70% anymore, I think that's an old wives tale today. Every single day we read about yet another corporation that pays zero taxes and gets rebates. And in fact Facebook's rebate is very small compared to oh say, an oil company or GE or Rupert Murdoch or dozens of others who do not pay year in and year or who pay a miniscule percentage like Romney's 14%.

    But even if it were true that the rich pay 70% of the tax revenue that total amount would most likely amount to about 5% of what they should be paying if they paid the same across the board rate that I pay. AND I'M FRIGGING RETIRED!!! The poor have nothing left to take and the rich won't pay a fair share so where does that leave us? The rich waging class warfare on the middle class.

  • View all 6 replies >

  • Fitz
    !
    Is the Fair Tax starting to look good to anybody else yet? A simple consumption tax, no loopholes, no deductions and no political pandering.
  • u
    ctc
    !
    Wasn't there anyone they could have given that remaining .07 Billion to??
    I would gladly take that 70 Million and pay an income tax at the 70% rate.
  • PayThatCEO
    !
    Time for a nice little boycott. Time to let Facebook know what we think of this. Take the first two paragraphs of this article and paste them to your Facebook page. Let everyone know that this company is getting fat and happy while the rest of us have to pick up the slack.
  • kathyparsell
    !
    Time for a little boycott, yes, a boycott on individuals paying the IRS personal income taxes until the tax code is corrected so that obscene rebates like this don't happen.
  • kathyparsell
    !
    @classychazy
    A state Representative from TN once told me that was the only answer. That was 25 years ago, I was 19, and thought he was speaking heresy!
  • Tralee
    !
    And the left gets their knickers all in a twist over oil profits, at least producing oil does something positive for America, we can run our cars, have plastic raincoats, heat our homes and enjoy life.
  • jessejaymes
    !
    But the oil companies won't let you build imaginary farms, solicit millions of people by spamming them to be "your friend" and pretend they don't know a thing when you bully a classmate on Facebook.
  • Knightkore
    !
    I read this and my mouth just dropped open....I mean seriously....they pay NO taxes but get all their profits back plus some? In what world could any of us do this? Close the loopholes now....{what is it with progressive liberals and their companies....Facebook, GE....some of the highest monied corporations and they end up paying NOTHING....}
  • harold_lloyd
    !
    This is the truth of Republican 'unfettered capitalism'.

    It turns out that 'unfettered' means free to buy a congressman or two, and get favorable tax treatment.
  • u
    classychazy
    !
    Disgusting! You all wonder why we say those who make this kind of profit should pay their fair share? Yet we the middle class and the working poor get bent over and screwed every time these companies are allowed to get a way with this bullshit!
  • kathyparsell
    !
    I believe it was Voltaire (if not I am open to being corrected)that said a Democracy can only exist until the politicans realize their power over the people.
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