Facebook to pay NO tax for 2012 and will even get tax refund of $429m despite $1BN profits (1 Viewer)

slaym

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That's messed up.

Facebook pay no tax for 2012 and even get a tax refund of $429MILLION despite $1BILLION in profits | Mail Online

Facebook will not pay any tax for 2012 despite making $1.1 billion in pre-tax profits from U.S. operations, according to a report released on Thursday.
But Mark Zuckerberg's company will also get a multimillion dollar tax refund of around $429 million according to Citizens for Tax Justice (CTJ).

The refunds reportedly come from tax deductions on executive stock options and share awards
 

NCSaint

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Damn. Maybe I should be an investor. If they can pull in 1B+ profits, pay no tax and get a 400M+ refund they must have some smart guys running the company.
 

gwballin

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That's messed up.

Facebook pay no tax for 2012 and even get a tax refund of $429MILLION despite $1BILLION in profits | Mail Online

Facebook will not pay any tax for 2012 despite making $1.1 billion in pre-tax profits from U.S. operations, according to a report released on Thursday.
But Mark Zuckerberg's company will also get a multimillion dollar tax refund of around $429 million according to Citizens for Tax Justice (CTJ).

The refunds reportedly come from tax deductions on executive stock options and share awards

The 1.1 billion in pretax profits is calculated using GAAP not the tax law which has to be followed when filing a tax return.

The problem with these articles is that they never explain that they are mixing terminology when comparing apple to oranges.
 

El Caliente

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The 1.1 billion in pretax profits is calculated using GAAP not the tax law which has to be followed when filing a tax return.

The problem with these articles is that they never explain that they are mixing terminology when comparing apple to oranges.

It's like when people were crying foul over GE a few years back. Saying that they didn't have to pay taxes because they donated to Obama's first campaign, when in actuality they weren't paying taxes because they had NOL's out the wazoo that they were using.
 

steltz02

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Rein in corporate welfare!!

Welfare Statistics: Government Spends More on Corporate Welfare Than..

...hard working humans being able to put food in their mouth and their kid's mouths or fat cat bankers and CEOs shoving more money into their offshore bank accounts.

corporate_wl.jpg
 

was437

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The 1.1 billion in pretax profits is calculated using GAAP not the tax law which has to be followed when filing a tax return.

The problem with these articles is that they never explain that they are mixing terminology when comparing apple to oranges.

I just thought id give people a second chance to see this. We tend to skip over the informative portions of threads.
 

BHM

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The 1.1 billion in pretax profits is calculated using GAAP not the tax law which has to be followed when filing a tax return.

The problem with these articles is that they never explain that they are mixing terminology when comparing apple to oranges.


I am not a tax law expert so I will direct my question to others.

Did they make huge profits and will they pay taxes?
 

DaveXA

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I am not a tax law expert so I will direct my question to others.

Did they make huge profits and will they pay taxes?

Depends on what their taxable profit was (I don't have any idea what the amount is), among a ton of other variables. Like gw said, 1.1 billion is a GAAP figure and has nothing to do with their actual tax liability.
 

mulletslinger

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how many mortgages of good honest people would that pay off? like mine.

sketchy on the good.
 

gwballin

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I am not a tax law expert so I will direct my question to others.

Did they make huge profits and will they pay taxes?

It appears that when applying GAAP (which as a publicly traded company the SEC reqires them to do for financial statement purposes) they did have a 1.1 billion dollar pretax income.

It also appears that when applying tax law (which as a company filing a tax return the IRS requires them to do) they did not have a current income tax liability.

I haven't studied Facebook's SEC filings or tax returns but it is not at all uncommon for this to happen because the rules are different.

The thing to take into account is that the article is taking a snap shot instead of looking at a cumulative look at what's going on which is a requirement when trying to evaluate corporate income taxes. It's not like individual taxes due to the timing differences created by the differences between GAAP and the tax law. For example a company might get a huge deduction for tax purposes for depreciation and a smaller one for GAAP. This gives a higher GAAP income and a lower taxable income in year 1. Over the course of the life of the asset total depreciation will be the same for GAAP and tax so in later years (all else being equal) GAAP income will be lower than taxable income.

There are some permenant difference between GAAP and tax but those are usually not as significant as the timing differences.
 

JonsDuu

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Article from last year Feb 15, 2012
Facebook to Pay Employees' $5 Billion Tax Bill - Technology and IT Jobs News and Advice

When the stock of Facebook employees gains liquidity with the company's IPO, Uncle Sam will be demanding $5 billion in taxes.
But luckily for those workers, Facebook will pick up the tab, according to a report in the Financial Times. Facebook isn't being completely unselfish; under U.S. tax rules, the company will be able to offset the tax bill against its profits and get a $500 million tax refund in 2013.

More info on the tax stuff: Facebook

So as I understand it, facebook paid its employees with equity, restricted stock units, when it was private. When facebook IPO, all the RSU become vested and the employees have to pay taxes on them as normal income. Facebook used its own money to pay the employees taxes, $5 billions of it, in 2012. That resulted in a net loss in 2012, so it was able to carry those losses forward and offset future profit against the losses in 2012.
 

NYCsaint

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It appears that when applying GAAP (which as a publicly traded company the SEC reqires them to do for financial statement purposes) they did have a 1.1 billion dollar pretax income.

It also appears that when applying tax law (which as a company filing a tax return the IRS requires them to do) they did not have a current income tax liability.

I haven't studied Facebook's SEC filings or tax returns but it is not at all uncommon for this to happen because the rules are different.

The thing to take into account is that the article is taking a snap shot instead of looking at a cumulative look at what's going on which is a requirement when trying to evaluate corporate income taxes. It's not like individual taxes due to the timing differences created by the differences between GAAP and the tax law. For example a company might get a huge deduction for tax purposes for depreciation and a smaller one for GAAP. This gives a higher GAAP income and a lower taxable income in year 1. Over the course of the life of the asset total depreciation will be the same for GAAP and tax so in later years (all else being equal) GAAP income will be lower than taxable income.


There are some permenant difference between GAAP and tax but those are usually not as significant as the timing differences.


For the football crowd - he's saying one system counts cash laid out, while the other can spread it like a signing bonus. Facebook might have some renegotiated contracts on the books, if you will.
 

JonsDuu

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For the football crowd - he's saying one system counts cash laid out, while the other can spread it like a signing bonus. Facebook might have some renegotiated contracts on the books, if you will.

Yeah. Great analogy.

Facebook restructured its employee contract by converting the base salary into signing bonus. It paid $5 billion in taxes in 2012; against a profit of $1 billion, it saw $4 billion in loss in 2012.

The signing bonus is spread over the life of the contract. In the case of a business losses, it's 3 years I think, maybe 2. So fb spread forward $1.33 billion loss in each of 2013, 2014, & 2015, much like the signing bonus is spread over the life of the contract for salary cap purpose.
 

gwballin

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Yeah. Great analogy.

Facebook restructured its employee contract by converting the base salary into signing bonus. It paid $5 billion in taxes in 2012; against a profit of $1 billion, it saw $4 billion in loss in 2012.

The signing bonus is spread over the life of the contract. In the case of a business losses, it's 3 years I think, maybe 2. So fb spread forward $1.33 billion loss in each of 2013, 2014, & 2015, much like the signing bonus is spread over the life of the contract for salary cap purpose.

If a company elects not to carry back the nol to get a refund of taxes paid in prior years, the nol can be carried forward for 20 years before it expires.

However the entire nol would be used in 1 year provided there was enough taxable income to absorb it.
 

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