Despite making more than $1.1 billion in profit on 2012, Facebook will receive a $429 million tax refund, yes, we said “million.”
The revelation comes courtesy of an analysis of the company’s public filings with the SEC by Citizens for Tax Justice.
How did they manage to do it? A single tax deduction that can be summed up in three simple words – executive stock options.
Like many large companies, Facebook issues options to its employees that allow them to buy shares at a later date at the price on the date in which the option was issued.
When the employee takes advantage of this option, Facebook gets to take the difference between what they pay and the current price of the stock and deduct that amount on their tax returns.
The company says it had a $559 million federal tax liability in 2012, but that tax liability isn’t actually a payment. The world’s largest social network also had a $1.03 billion “excess tax benefit” last year related to “stock option exercises and other equity awards.”
That benefit is what turns their federal tax liability into a refund.