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Old 02-17-2013, 09:20 AM   #1
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Facebook gets multibillion-dollar tax break

$1 billion in profits, $429 million tax refund. Gotta love cronyism..

It hasn’t drawn much attention, but Facebook’s first annual earnings report contains an accounting gem: a multibillion-dollar tax deduction for the cost of executive stock options and share awards.

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.

The difference is that Facebook—unlike, say, General Motors (GM)—relies heavily on stock options and restricted stock units as a form of compensation. It paid out a lot during its years as a private company that it must now recognize on its income statement and balance sheet.

You won’t find any $429 million tax refund in Facebook’s financial statements. Indeed, the company says it had a $559 million federal tax liability in 2012. But that liability isn’t an actual payment. In a footnote, the company also said that it had a $1.03 billion “excess tax benefit” last year related to “stock option exercises and other equity awards.” That benefit is what flips the federal tax liability into a refund. (A small portion is applied against state taxes.)

Facebook says that it anticipates reducing its tax liability in the future by an additional $2.17 billion by using further net operating loss carry-forwards that it has banked.

Facebook spokeswoman Ashley Zandy declined to discuss the tax break but pointed to the transcript of Facebook executives’ conference call with analysts. On the call, Chief Financial Officer David Ebersman cited the accumulated tax benefits and noted that the company ended the fiscal year with nearly $10 billion in cash and investments, “giving us great flexibility and risk protection.”

http://www.businessweek.com/articles...llar-tax-break
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Old 02-17-2013, 09:24 PM   #2
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....so I'm guessing no one thought this out as a workable
option in SEC and IRS pockets....
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Old 02-18-2013, 07:31 AM   #3
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But but but we cant touch the big companies; they'll just pass the problem down to their customers.....or leave the country altogether.
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Old 02-18-2013, 07:37 AM   #4
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I don't know about the fine details of Facebooks situation. But in general, what's the difference in stock options and cash when it comes to compensating employees? Companies get to deduct their payroll, why wouldn't they get to deduct their stock compensation? The rationale is that the recipient pays tax on what they receive as income. I know it's a great headline -- $1B profit - no tax. But I write off all employee compensation in my little business. Why would it be different for Facebook?
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Old 02-18-2013, 07:48 AM   #5
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Personally, I think it's great that big corps can game the tax system and shift more of their burden in my direction. It's good for the economy..

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Old 02-18-2013, 08:10 AM   #6
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Originally Posted by Texdentist View Post
But I write off all employee compensation in my little business. Why would it be different for Facebook?
....difference...??....like about a $1,000,000,000, but if your
profit out ways your expenses by billions of dollars well I guess
thats fair....

Quote:
Originally Posted by Vette_Newb
Personally, I think it's great that big corps can game the tax system and shift more of their burden in my direction. It's good for the economy..
....why not, I got a extra $50 refund....
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Old 02-18-2013, 08:14 AM   #7
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....why not, I got a extra $50 refund....
Great, that will get you a 1/2 tank of gas and a meal.
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Old 02-18-2013, 08:16 AM   #8
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Great, that will get you a 1/2 tank of gas.
Fixt.
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Old 02-18-2013, 08:57 AM   #9
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Fixt.
...hey, you ate my meal....
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Old 02-18-2013, 09:12 AM   #10
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....difference...??....like about a $1,000,000,000, but if your
profit out ways your expenses by billions of dollars well I guess
thats fair....
Again, I'm not sure I know exactly what went on here. But if Facebook made $1B in profit and then disbursed most of it as compensation, then they shouldn't pay taxes on it because the people who received the compensation will. Taxes aren't being nullified, they are being transferred. At least that's the usual corporate way. Between compensation, dividends to stockholders and other deductions, big corps can often show no profit -- and that's how it SHOULD work. Corps should be in the business of making money for their stockholders and employees - not hoarding money. And if they transfer that profit to employees and stockholders, they are the ones who should be paying the taxes. The question is not whether the company made a profit or not. It's what did they do with the profit. If it went to individuals or investors, the company shouldn't have to pay tax on it.
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Old 02-18-2013, 09:38 AM   #11
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Again, I'm not sure I know exactly what went on here. But if Facebook made $1B in profit and then disbursed most of it as compensation, then they shouldn't pay taxes on it because the people who received the compensation will. Taxes aren't being nullified, they are being transferred. At least that's the usual corporate way. Between compensation, dividends to stockholders and other deductions, big corps can often show no profit -- and that's how it SHOULD work. Corps should be in the business of making money for their stockholders and employees - not hoarding money. And if they transfer that profit to employees and stockholders, they are the ones who should be paying the taxes. The question is not whether the company made a profit or not. It's what did they do with the profit. If it went to individuals or investors, the company shouldn't have to pay tax on it.
...I believe that small businesses should get tax breaks
as apposed to giant corps. they get much more than just
tax breaks, having a politician in your pocket does wonders
for companies...
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Old 02-18-2013, 09:50 AM   #12
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Originally Posted by Texdentist View Post
Again, I'm not sure I know exactly what went on here. But if Facebook made $1B in profit and then disbursed most of it as compensation, then they shouldn't pay taxes on it because the people who received the compensation will. Taxes aren't being nullified, they are being transferred. At least that's the usual corporate way. Between compensation, dividends to stockholders and other deductions, big corps can often show no profit -- and that's how it SHOULD work. Corps should be in the business of making money for their stockholders and employees - not hoarding money. And if they transfer that profit to employees and stockholders, they are the ones who should be paying the taxes. The question is not whether the company made a profit or not. It's what did they do with the profit. If it went to individuals or investors, the company shouldn't have to pay tax on it.

Enough of the common sense already! You're going to give the Socialists around here a heart attack!

Yes, Big corporations should pay more taxes so that individuals don't need to. Y'all realize what happens to those corporate taxes don't you? They get passed right down to the consumer in higher costs. Think it through people. Think it through.

IMO, businesses should pay no income taxes as long as all "profit" is passed to the investors.
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I'm taking care of my procrastination issues, just you wait and see.
Old 02-18-2013, 09:53 AM   #13
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...I believe that small businesses should get tax breaks
as apposed to giant corps. they get much more than just
tax breaks, having a politician in your pocket does wonders
for companies...
I agree to a point. Obviously big corps have loopholes the rest of us don't have. I would be for eliminating them. But I don't believe corps should be taxed on profits they pass on to others. If they did, the money would be getting taxed twice, and while that may be good for Democratic spending wishes, it's not good for the economy. Corporate taxes should be low to encourage investment and create jobs. Punish corps, and in the end, you punish everybody else. They should pay taxes on actual profits they don't disburse or invest. But otherwise, let the money flow down to people, not government.
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Old 02-18-2013, 10:30 AM   #14
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Again, I'm not sure I know exactly what went on here. But if Facebook made $1B in profit and then disbursed most of it as compensation, then they shouldn't pay taxes on it because the people who received the compensation will. Taxes aren't being nullified, they are being transferred. At least that's the usual corporate way. Between compensation, dividends to stockholders and other deductions, big corps can often show no profit -- and that's how it SHOULD work. Corps should be in the business of making money for their stockholders and employees - not hoarding money. And if they transfer that profit to employees and stockholders, they are the ones who should be paying the taxes. The question is not whether the company made a profit or not. It's what did they do with the profit. If it went to individuals or investors, the company shouldn't have to pay tax on it.
Glad to hear you don't mind picking up their tab.. while those accounts in the cayman's just keep filling up. I guess you missed the part where they are setting on $10 billion. And the taxes don't get nullified, this happens:



It becomes clearer every day as to why this country has money problems.. too much welfare, for the bottom 10% and top 10% and too much taxation on the middle 80%.
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Fascism is a religion of the state. It assumes the organic unity of the body politic and longs for a national leader attuned to the will of the people. It is totalitarian in that it views everything as political and holds that any action by the state is justified to achieve the common good. It takes responsibility for all aspects of life, including our health and well-being, and seeks to impose uniformity of thought and action, whether by force or through regulation and social pressure. Everything, including economy and religion, must be aligned with its objectives.
Old 02-18-2013, 11:11 AM   #15
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Well, VN, why don't we just tax corporations at 200% of income? I mean, that would be less tax for the rest of us, right? Oh, we might pay $100,000 for a base Corvette and $5000 for 40" flat screen TV, but by God, those corps would be paying our taxes for us. The same holds true at 100%, 50%, 25% and 5%. It all gets passed down to consumers. Corporations NEVER pay taxes, even when they write a check to the government, because they cover that check with higher prices.
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