Facebook Claims $429 Million Tax Refund Thanks To Stock Loophole

Facebook tax loop hole

Facebook will receive an upcoming tax refund of $429 million. The company is claiming the rebate thanks to a tax loophole.

Facebook reported almost $1.1 billion in pre-tax profits in 2012 and now the Citizens for Tax Justice (CTJ) says a single tax break loophole is giving nearly 50 percent of that total back to the social network.

According to The Inquisitr (note: I serve as editor of Inquisitr):

“The refunds are mainly due to the company’s use of a single tax break — tax deductibility of executive stock options — which reduced Facebook’s federal and state income taxes by $1.033 billion in 2012.”

Bloomberg Businessweek also reports that the company will likely reduce its future liability by another $2.17 billion with net operating loss carry-forwards that it collected.
While Facebook is not commenting on the tax break, the social networks executives did share news of its current position during a conference call with analysts.

During its conference call Facebook said it ended the year with nearly $10 billion in cash and investments.

Many company’s offer executives the option to buy stock at discounted prices in the future. After those lowered prices are exercised a company then takes a deduction between what employees originally agreed to pay and the value of what the stock is currently worth.

Essentially Facebook considered the exercising of stock to be a profit-reducing expense, a maneuver that is 100 percent legal under current taxation guidelines.

James Kosur

James Kosur has worked in the new media space for the last 10 years, helping many publications build their audiences to millions of monthly readers. He currently serves as the Director of Business Development at Business2Community.com and the CEO of Aven Enterprises LLC.

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