Facebook Paid No Taxes For 2012 - gets $429 million from taxpayers

[sportage]

Whats Facebook?

 

[Fern]

no. Stock options are not taxed until they are actually cashed in. and they are not taxed as wages... they are taxed as capital gain (20% compared to 35%).

Additionally those exec's will have enough deductions to ensure they have to pay almost zero taxes when they do cash it in.

No.

Even if they were ISO's you have to meet the holding period. If you don't it's taxed as normal wages (with w/h taxes and FICA taxes charged) and the company will receive a deduction as if it were normal wages.

If they were ISO's that had met the holding Facebook wouldn't get a tax deduction and could not have reduced their income tax generating a refund. From what I read, Facebook has an NOL carryforward resulting from the options, so even if they were ISO's the holding period wasn't met.

I doubt that they were ISO (a type of stock option that qualifies the tax benefits you mention if certain requirements are met) since they knew the holding period wasn't going to be met. Looks to me like non-qualified options awarded in anticipation of going public. I.e., they got the SEC approved percentage of stock which could be sold by employees in the IPO (IIRC, the SEC put out a schedule of sales of stock permitted ranging over months/years).

Fern

 

[Jaskalas]

I'm sure there will be the usual suspect Rich Republican Corporate Apologists coming to defend this.

Defense of what, America having a ruling class that lives by its own tax-free rules? I support politicians who want a flat / simply / fair / whatever cuts the loopholes tax. Quite a few of them were Republican - but the ruling class won't elevate them or their ideas into a position of power.

• A simple tax code is the solution.
• When was the last time you supported someone who wants one?

 

[CPA]

Defense of what, America having a ruling class that lives by its own tax-free rules? I support politicians who want a flat / simply / fair / whatever cuts the loopholes tax. Quite a few of them were Republican - but the ruling class won't elevate them or their ideas into a position of power.

• A simple tax code is the solution.
• When was the last time you supported someone who wants one?

While I agree with you, this wasn't really a tax issue. It was a recognition of expense issue that people like Dave clamored for 8 years ago. Well they got what they asked for, but because they don't understand accounting and tax preparation they are now outraged that Facebook, applying GAAP and acceptable tax strategy (not really even strategy, more like tax law), got a a refund. I just sit back an laugh.

 

[CLite]

I didn't read the OP but this stood out at me....



A refund? I can understand it taking the tax to zero but a negative $429 million?

Again, didn't read so not sure what's going on but doesn't seem right if real?!?!

Uhm it's not negative $429 million, a refund is a return of taxes paid. Facebook paid $429 million taxes over the course of the year, but their tax liability is zero, so the $429 million is returned. They essentially gave the government a zero interest loan.

This doesn't mean I agree with their tax liability being zero, I just wanted to clarify what a refund was.

 

[Ausm]

And this, boys and girls, is why our tax code will not ever be simplified or the business tax just scrapped. Best government.....that business can buy.

If/when the Republicans regain the WH, I am looking forward to seeing Legislation from that "R's" which will fix this problem.

 

[CPA]

If/when the Republicans regain the WH, I am looking forward to seeing Legislation from that "R's" which will fix this problem.

My fix is to put stock options back as non-compensation expense. Bam, issue fixed.

 

[kage69]

their(sic) down with Obama so its cool.

If they were big oil, this would be bad.

I see that American money going to terrorist sympathizing nations in one of those industries doesn't prevent you from making silly comparisons. Does Facebook use ruin anything like fossil fuels ruin the environment?

I wish more Americans "were down" with comparing apples to apples. Throwing an alternator in with the fruit does not a point make.

 

[Franz316]

America's tax system is such a joke. But hey, when the inmates make the rules and elect the leaders, what else would you expect.

 

[Darwin333]

Good for them.

Now just to get the rest of taxpaying citizens and other businesses to no longer have to pay taxes.

Did you miss the part in which its claimed they received a multi-hundred million dollar refund?

Most everybody is focusing on bringing facebook into their misery, we should instead focus on bringing ourselves into their level of freedom.

So you are saying that all of us should focus on how to get government welfare?

 

[Darwin333]

I see that American money going to terrorist sympathizing nations in one of those industries doesn't prevent you from making silly comparisons. Does Facebook use ruin anything like fossil fuels ruin the environment?

I wish more Americans "were down" with comparing apples to apples. Throwing an alternator in with the fruit does not a point make.

Does Facebook provide the lifeblood of our economy without which we would be instantly thrust into a depression the likes of which we have likely never endured?

 

[CPA]

America's tax system is such a joke. But hey, when the inmates make the rules and elect the leaders, what else would you expect.

Again this isn't a tax issue as much as it is an accounting issue, an accounting issue pushed by Congress on FASB back in 2005.

 

[Londo_Jowo]

Imagine that, yet another thread by the OP that turned out to be incorrect.

 

[CPA]

Did you miss the part in which its claimed they received a multi-hundred million dollar refund?


So you are saying that all of us should focus on how to get government welfare?

ugh, this was a refund of taxes already paid in. Congress set this up themselves. If they didn't jump to "fix" an issue that didn't exist in the first place, none of this would have happened.

 

[Fern]

ugh, this was a refund of taxes already paid in. Congress set this up themselves. If they didn't jump to "fix" an issue that didn't exist in the first place, none of this would have happened.

Perhaps I am misunderstanding you CPA, but as far as I can tell this has nothing to do with any hasty fix by Congress. It certainly has nothing to do with the changes GAAP (which doesn't affect tax treatment).

I believe tax law regarding stock option, whether qualified like ISO's or (regular) 'non-statutory options', has remained unchanged for many, many years.

There simply is no 'story' to this story. In simplest terms, the taxable profit from Facebook was essentially transferred to the execs/employees who will instead pay the income tax. As far as income tax revenue goes, this is at worst a net wash for the US govt.

In fact, it is most likely a rather big gain for the US govt in terms of revenue received this year. In terms of tax planning I cannot think of a worse way to structure this transaction. What Facebook (or the execs/employees) did was maximize the amount of taxes paid to the US govt (as well as state(s) ). This was not a tax savings scheme, this was a 'reward your execs/employees scheme' and was quite expensive in terms of tax. Here's why:

1. IIRC, there were about $4B in taxable stock options. I.e., the employees will pay tax on the $4B. This should result in about $1.4 Billion in tax revenue to the US govt (and likely a considerable amount of state income taxes). $4B x .35 = $1.4B. If they had followed the rules for holding stock options the tax would have been far lower: $4B x .15 = $600 million. This maneuver costs them an additional $800 million in income taxes due this year.

However, Facebook can use $429 million of the deduction this year. That saves approx $150 Million (not Billion). So, the govt comes out approx $1.25 Billion ahead.

2. Because the stock options are treated as taxable wages Social Security taxes are now due. The $4B will taxed at 2.9% (Medicare portion of SS) = $114 million - assuming that the execs all reached the OASDI limits and thus pay the absolute minimum. If they had properly followed the rules for stock options that tax would have been zero.

This whole thing is terribly misrepresented in the article.

Fern

 

[Gintaras]

So the corporation doesnt pay tax because they spent all their profit on stock? SO the people who received the stock pay the tax?

Some need money more than others...If you have participated in Money Olympic Games: Bill Gates, Warren Buffet...etc...You would understand....

On the other hand, do you have same FANTASY how to spend your earned money with those who already have way more that you can dream of?

Some do need bigger yachts...some have nothing to eat...

A Wonder Of Capitalism....

 

[DCal430]

no. Stock options are not taxed until they are actually cashed in. and they are not taxed as wages... they are taxed as capital gain (20% compared to 35%).

Additionally those exec's will have enough deductions to ensure they have to pay almost zero taxes when they do cash it in.

You are wrong options are tax at ordinary income when they are exercised, and they are not deductible until then either.

 

[OutHouse]

Facebook gives the government billions dollars worth of intelligence data. The $429 million is a drop in a bucket.

Yup facebook is the wet dream the NSA & CIA could implement. The refund is a thank you.