Tax Peculiarities Mean Facebook Paid No Net Taxes For 2012 307
Frosty Piss writes "Despite earning more than $1 billion in profits last year, social media juggernaut Facebook paid zilch when it came to federal and state taxes in 2012. In fact, the website will actually be getting a refund totaling $429 million thanks to a tax reduction for executive stock options. In the coming years, Facebook will continue to get monster tax breaks, totaling about $3 billion. 'The employees cash in stock options, and at that point there is tax deduction for the company,' Robert McIntyre, of watchdog group Citizens for Tax Justice, said. 'Because even though it doesn't cost Facebook a nickel, the government treats it as wages and they get a deduction for it.'" (That's not to say that Facebook employees' salaries didn't get taxed.)
Re:Peculiarities? (Score:5, Informative)
This is the definite truth. I can personally vouch for the fact that the federal government just loves giving huge tax credits to incomes between $6000 and about $40,000 a year. Middle class people can generally find enough deductions to drop their tax burden and they also have most of the same "loopholes" available to them that rich people do.
The real problem with the tax code is that it's so complicated that a person has to be able to pay good money to shield their money from taxes, mostly by paying an expert to deal with the labyrinthine tax code. It just doesn't become economical to do so until that person has some serious assets.
Of course, corporate tax code is completely from individual tax code. I personally clicked into this article to see if anyone who knows more than I do had yet addressed the claim that offering stock options doesn't cost Facebook anything. No matter how much all of us - myself included - would like to see corporations pay more taxes, the fact is that most of the ways they avoid paying up (but certainly not all) involve giving the money to their employees or charities instead. And no matter what anyone else on Slashdot seems to think, anyone cashing out stock options for Facebook is (now) a rich person paying taxes on that income.
Re:Peculiarities? (Score:5, Informative)
Forbes did an article last April about what some companies pay in taxes. Here's a few of the more recognizable companies.
Exxon Mobil - 42% ($27.3 billion paid on $41 billion in net income)
Chevron - 43.3% ($17.4 billion paid on $26.9 billion in net income)
JP Morgan Chase - 29.1% ($8.2 billion paid on $19 billion in net income)
WalMart - 32.6% ($5.9 billion paid on $15.7 billion in net income)
Microsoft - 15.9% ($5.3 billion on $23.5 billion)
Wells Fargo - 31.5% ($4.9 billion on $15.9 billion)
IBM - 24.5% ($4.2 bil on $15.9 bil)
Apple - 24.6% ($4 bil on $33 bil)
Intel - 27.2% ($3.3 bil on $12.9 bil)
Oracle - 23.6% ($2.93 bil on $9.7 bil)
Walt Disney - 33.8% ($2.3 bil on $5 bil)
McDonald's - 31.3% ($2.1 bil on $5.5 bil)
Source: http://www.forbes.com/sites/christopherhelman/2012/04/16/which-megacorps-pay-megataxes/ [forbes.com]
Re:Peculiarities? (Score:5, Informative)
The reason they get this tax break is that only profits are taxed.
A few years back companies were literally printing money with their stock options. They could give any employee seven figures in stock without affecting their bottom line. So they did. In 2006 this was changed because it was unfair to all the other shareholders, who lost value in the company for each new share that was printed.
But if options are a business expense you can reduce your taxable profit by giving out lots of options.
Re:Peculiarities? (Score:0, Informative)
You're an arsehole
Not in Australia (Score:4, Informative)
I don't know the US legal system nor it's taxation, however I do know the Australian system.
For comparison, if you were doing that in Australia, particularly if you described it the way you have, you would easily fall under the Income Tax Assessment Act of 1936 Part IVA--Schemes to reduce income tax [austlii.edu.au]. At which point they would use section 177F to remove the affects of any benefit you're creating for yourself, tax you on the new amount, and depending on the severity of the situation, there could be fines and even jail time.
The difficulty in Australia is that to figure out this can take quite a lot of time and money, however the ATO has special divisions that target the ones they will get the most gain from. One of my lecturers at university was one of the people who worked at the ATO on high net worth individuals to try and figure out if they were dodging tax. He had a lot of insight on methods used to find people who were living off of loans from corporations which they themselves controlled or owned, such that they were re-classifying their income as expenses. It's actually really interesting how they go about it.
While I know the US is very different in this regards, I'd be somewhat surprised if something like this didn't exist in the US.