Facebook Gets $429 Million Tax Refund

Based on a report from Citizens for Tax Justice (CTJ), Facebook will receive a $429 million tax refund this year.

With over one billion users worldwide, the company reported nearly $1.1 billion in pre-tax profits from 2012. 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.

According to Bloomberg Businessweek, the company said that it anticipates reducing its future tax liability by an additional $2.17 billion with net operating loss carry-forwards that it collected.

Ashley Zandy, Facebook spokeswoman, wouldn’t comment on the tax break but did point out a transcript of a Facebook executives’ conference call with analysts in which CFO David Ebersman mentioned the accumulated tax benefits and said that the company ended its fiscal year with almost $10 billion in cash and investments.

CTJ said the tax footnotes in Facebook‘s January 30 financial statement aren’t illegal. Many large corporations give their executives options to buy company stock at a discounted price in the future. When exercised, corporations can take a deduction for the difference between what employees originally paid for the stock and what it’s currently worth. Basically, the business is treating the cost of non-cash compensations, like stock options, as a profit-reducing expense.

SEC filing reveals Facebook got a $429 million net tax rebate due to stock option loophole. ow.ly/hIIdc

— CTJ (@taxjustice) February 15, 2013

Facebook’s announcement of the $429 million refund comes only a few days after the social network giant confirmed that it was a victim of a “sophisticated attack” by hackers during the month of January. The company said that “there is no evidence to the fact that users’ data have been compromised.”