Facebook Posts Record $1.1 Billion Profits But Still Gets Huge Tax Break

Facebook IPOBy Eric Brown

Last year, Facebook went public and brought in record profits exceeding $1.1 billion. And yet, not only will the ubiquitous social network not be paying any taxes, it will be getting a huge tax break.

According to Bloomberg Businessweek, Facebook reported earning $1.1 billion in profit throughout 2012, but after some nifty accounting, it will not be paying a cent in either state or federal taxes. Instead, the federal government will provide Facebook with a $429 million tax refund. How does that work exactly?

Thanks to creative use of a tax deductibility on stock options, the government will be paying Facebook just shy of half a million as a refund on taxes paid in 2010 and 2011.

Using stock option tax breaks, Facebook was able to give its executives the ability to purchase stock at dirt-cheap prices. And when the executives use those options, the company can write off the difference in prices as a loss and deduct it from corporate taxes for the year, according to Citizens For Tax Justice, which predicted Facebook would make a move like this.

According to CTJ, this won't be the last time Facebook embraces stock option tax breaks to avoid paying taxes.

"Facebook is also carrying forward another $2.17 billion in additional tax-option tax breaks for use in future years," CTJ writes on a multi-page report about the latest tax findings.

So essentially, over the next several years, Facebook stands to pay absolutely zero California or federal taxes, all while using stock options from its IPO to receive a total of $3.2 billion in tax refunds from the government.

While all of this seems crazy, it's important to note that Facebook isn't the only company that makes use of these stock option tax breaks. A 2011 CTJ report states that 280 Fortune 500 companies use similar methods to shield or entirely write off their tax payments.

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Facebook: For idiots only!

February 20 2013 at 2:10 PM Report abuse +1 rate up rate down Reply

let obama ma tax his buddy Facebook...........and perhaps GE and Goldman Sac PAY THEIR FAIR SHARE......

February 19 2013 at 9:03 PM Report abuse rate up rate down Reply

Wow maybe this is where obummer should start looking.

February 19 2013 at 2:37 PM Report abuse rate up rate down Reply

The individuals tha exersized those options pick up the same amount as taxable compensation income. Company deducts the compensation, employees pay tax on compensation. Funny how the article doesn't mention that.

February 19 2013 at 12:42 PM Report abuse rate up rate down Reply
1 reply to levipo's comment

Employees will still find ways NOT to pay taxes or very small part , too! Dont fool yourselves into thinking that Facebook employees are not rich themselves!!

February 19 2013 at 7:35 PM Report abuse rate up rate down Reply

what taxes do the recipients of the options have to pay?

February 19 2013 at 12:02 PM Report abuse rate up rate down Reply

Solyndra. Facebook. What's the difference? Warren Buffet - another billionaire supporter of Pres. Obama - is supposed to be fighting the IRS over a one billion dollar tax assessment against his company.... yet Mr. Buffett complains he doesn't pay enough taxes???

February 19 2013 at 11:17 AM Report abuse rate up rate down Reply

Please take my SSI i don`t want these big corp`s making a billion dollars to have to pay any tax.sorry S.O.B.`s

February 19 2013 at 11:06 AM Report abuse rate up rate down Reply

notice hp only said facebook, but left out hp, and lots of other companies,fox had whole ;ist on,not just fb

February 19 2013 at 10:58 AM Report abuse -1 rate up rate down Reply

Tax breaK???????? Yep another rich gets the break while the middle class pays more thn their share Hey OB gave big business 2% lowering of corp. tax Wait ubtil you see all the rich and businesses at got a break on Obamacare taxes Yep Mc Dona;ds dpn't have to pay but we the people do Wake up people OB and gang are killing you and and they got you thinkink .OH there for me LOL their politicians working for guys like George Soros

February 19 2013 at 10:46 AM Report abuse +2 rate up rate down Reply

What a joke.

February 19 2013 at 10:45 AM Report abuse +1 rate up rate down Reply