It may not have been given much focus, but the initial yearly earnings report of Facebook has an accounting milestone: a tax deduction worth billions of dollars for the executive stock options as well as share awards costs.
According to a Citizens for Tax Justice statement last February 14, even though 1.1B dollars US operations pre-tax profits have been reported by Facebook in 2012, zero federal as well as state taxes will probably be paid by the company—and even get around 429M dollars in federal tax refund.
The lobbying and tax research organization states that companies like Facebook should have a similar treatment of stock options in their shareholders report as well as respective tax filings. The January 30 footnotes of Facebook in their financial statement is termed by Citizens for Tax Justice as a remarkable admission. However, the breaks Facebook is claiming aren’t illegal. Facebook and other similar companies are permitted to treat non-cash compensation cost, like stock options, as expenditure which decreases profit, basically just like they look at cash payment like salaries.
Nonetheless the difference lies in the fact that stock options as well as restricted stock units are relied upon by Facebook as form of payment. In their years as private company, Facebook has compensated a lot and it must now declare in its balance sheet as well as income statement.
The 429M tax refund can’t be found in the financial statements of Facebook. The company states a 2012 559 million dollar federal tax liability. The liability is nonetheless not a concrete payment. A footnote by the company also showed that it an excess tax benefit of 1.03 billion dollars has been given them last year linked to other equity awards as well stock options. The federal tax liability is then turned into a refund due to this benefit.
Facebook states its anticipation of future tax liability reduction by an added 2.17 billion dollars through the use carry-forwards in operating loss which it has already banked.
Ashley Zandy, spokewoman for Facebook, refuse any tax break discussion but delineated on the transcript of the conference call of Facebook executives with analysts. David Ebersman, chief financial officer, cited that Facebook’s fiscal year ended with almost 10B dollars in investments and cash which give the company great risk protection and flexibility.