“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.
But that’s not all of the stock-option tax breaks that Facebook generated from its initial public offering of stock (IPO). Facebook is also carrying forward another $2.17 billion in additional tax-option tax breaks for use in future years.
So in total Facebook’s current and future tax reductions from the stock options exercised in connection with its IPO will total $3.2 billion.”
Facebook makes a billion-dollar profit.
Facebook executives cash out billions of dollars in stock options (money taxed at the 15% capital gains rate).
Taxpayers then cough up an additional $429 million paid to Facebook, which because of its generosity to its own executives won’t be paying state or federal corporate income taxes for years to come.
– Jay Bookman