While most Americans saw their taxes increase at the beginning of the year, Facebook paid no income taxes at all. Even after seeing record profits of over $1 billion, the website will get a refund for the 2012 tax year, according to a new report from Citizens for Tax Justice.
Using a tax reduction for executive stock options linked to its initial public offering, the social media giant will actually receive a refund of $249 million. In addition, Facebook will continue receiving enormous tax breaks for several years, netting the company around $3 billion in savings. The report from Citizens for Tax Justice cites Facebook’s most recent annual financial data, claiming their money-saving accounting practices were smartly hidden within the tax footnotes.
“The employees cash in stock options, and at that point there is tax deduction for the company,” Robert McIntyre, of the watchdog Citizens for Tax Justice, said in a recent interview with Fox News. McIntyre goes on to say that even though it “doesn’t cost Facebook a nickel, the government treats it as wages and they get a deduction for it.”
As if the domestic savings were not enough, Facebook also paid a foreign tax rate of just around 0.3 percent in 2011.
Ashley Zandy, an official spokesperson for Facebook, declined to openly discuss the tax break and instead referred to a transcript of Facebook executives’ conference call with analysts.
In this particular call, Facebook’s Chief Financial Officer David Ebersman spoke of accumulated tax benefits. He also noted that Facebook ended their fiscal year with nearly $10 billion in cash and investments, claiming this gave the company 'great flexibility and risk protection.'
During the fourth quarter, Facebook delivered results that were well above Wall Street's initial expectations on January 30. They also sought to show that Facebook has finally transformed itself into a 'mobile company' after first rising to dominance as a Web-based social network.
Facebook is just one of many big corporations who have recently faced accusations of tax avoidance. Thirty of the most profitable companies in America paid no net income tax during the years of 2008 to 2010 according to Citizens for Tax Justice.
This news comes after President Obama’s recent State of the Union address in which he advocated for getting rid of tax loopholes and deductions for the well-to-do and well-connected.
President Obama’s 2008 and 2012 campaigns each received large campaign donations from social media giants like Facebook, which has many experts questioning if this is the reason why the companies have not been singled out for tax breaks.