Need an example of the sort of tax loopholes used by major corporations that the president spoke of closing in his State of the Union Address? How about an accounting gem used by Facebook, Inc., that enables the company to report earnings of $1.1 billion and end up paying zero dollars in federal and state taxes? It gets worse. According to a report published Friday by consumer watchdog group Citizens for Tax Justice, Facebook stands to receive a federal tax refund of about $429 million.
The explanation is simple. Facebook — unlike many other major corporations — relies on stock options as a form of compensation. You won’t find the $429 million tax refund in Facebook’s financial statements. In fact, quite the opposite: The company had a $559 million federal tax liability in 2012. But the mind-numbing lunacy doesn’t stop there. Facebook anticipates reducing its tax liability in the future by an additional $2.17 billion through similar tactics.
While Citizens for Tax Justice says that companies like Facebook should treat stock options the same in their reports to shareholders as they do their tax filings, Businessweek is quick to defend the social media giant. Its writers point out that there is nothing illegal about the tax breaks the company is claiming.
But the same can be said about the tax-sheltering strategies used by the industries that Obama targets in his passionate appeals for fairness. Maybe the difference is that Mark Zuckerberg , CEO of Facebook, is also an FOO — Friend of Obama. Zuckerberg donated heavily to Obama’s re-election campaign.