Facebook Tax Breaks: Why is Facebook Paying Zero Taxes?

Facebook pulled in more than $1.1 billion in pre-tax profits in the United States alone in 2012 — so why is it paying nothing in taxes?

According to Business Week, the social media giant even stands to receive a federal tax refund in the neighborhood of $429 million … to subsidize the cost of executive stock options in shares.

Tax research and anti-tax-lobbying organization Citizens for Tax Justice calls the footnotes in the company’s January 30 financial statements "an amazing admission,"  but that there’s nothing illegal about what Facebook is doing. Since Facebook relies heavily on stock options as a form of executive compensation, as opposed to high salaries or excellent benefits.

Facebook posted a $559 million federal tax liability in 2012, but that liability does not translate into actual payment. Don’t fear, American taxpayer — their accountants have some tricks up their sleeve. Utilizing a $1.03 billion "excess tax benefit" related to “stock option exercises and other equity awards” (revealed in a footnote, no less), Facebook is able to flip that into an actual tax refund. Citizens for Tax Justice says the company should level with their shareholders and report stock options to them in the same way they do in their federal tax filings.

Facebook even intends to reduce their tax liability in the future even further by $2.17 billion by deploying other net operating loss carry-forwards it has racked up.

During a time of fiscal crisis, why is one of the America’s biggest tech companies — and the market leader of world social networking — paying less in taxes than a part-time fry cook?

Outrageous. 

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Tom McKay

Tom is a staff writer at Mic, covering national politics, media, policing and the war on drugs. He is based in New York and can be reached at tmckay@mic.com.

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