Despite a bungled IPO, Facebook’s Mark Zuckerberg is still suddenly a billionaire and quite a few Facebook employees are worth a mint.
Because of that new found wealth, Facebook uses the tax law to the fullest, and counts the stock in a way that makes the books look as though the company faced a loss. Facebook actually owes $559 million in federal taxes, but because of a cute accounting trick, they’re writing off their stock options and getting a rebate.The end result is a whopping $429 million tax refund.
Anyone else think the US tax law is a mess and tilted in favor of the 1%? Usually it’s the bankers that are squeezing the system for all its worth but this time, it’s everyone’s favorite social tool.
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.
Whether it’s gaming the tax law this time or claiming ownership of your own photos, the history of this company is pretty clear. While I can see the benefits of using Facebook in certain circumstances, the annoying behavior that will never go away outweighs the benefits for me, which is why I closed my account. Buyer beware.