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.”
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.