Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (Full Version)

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kalikshama -> Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/14/2013 11:10:32 AM)

Mark Zuckerberg commands attention even if Facebook’s much hyped IPO was lackluster. As a visionary billionaire, when Mr. Zuckerberg speaks, people listen. Having $1.1 billion in profits must feel pretty good. Paying no taxes to the IRS and even to revenue starved California? Priceless. See Facebook Paid No Income Taxes In 2012.

Facebook’s first Form 10-K filed with the SEC since its face-plant public offering shows $1.1 billion in profits and a complete pass on federal and state income taxes. In fact, Facebook says it is getting back tax refunds of $429 million. See Facebook Gets a Multibillion-Dollar Tax Break. Is this legal, you might ask?

Yes, under current law it is, as Facebook is want to point out. Facebook can legitimately deduct stock options given to execs. That tax break reduced Facebook’s federal and state income taxes by $1,033 million in 2012, including refunds of earlier years’ taxes of $451 million. See Here’s Why Facebook Is Getting A Refund On Its Income-Tax Bills. Gone are the questions for shareholders about which gains could be taxed as capital gain rather than ordinary income. See Top Tax Tips From Zuckerberg’s Facebook Bonanza.

For links and to read more, see http://www.forbes.com/sites/robertwood/2013/02/19/tax-increases-why-facebooks-billion-dollar-income-isnt-taxed-at-all-by-irs/



kalikshama -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/14/2013 11:12:55 AM)

Tell Congress you are tired of paying for Mark Zuckerberg's stuff

Despite Facebook reporting profits of over $1.1 billion in 2012, the company is expected to pay no federal or state income taxes. In fact, Facebook will receive net tax refunds totaling $429 million, because tax deductions on executive stock options can be written off as salary deductions.

This is a perfect example of how the deficit and spending cuts are driven by loopholes that allow corporations and wealthy Americans to get all the breaks.

Please join with Daily Kos and our partners at CREDO Action by signing the petition telling Congress it's time to end tax loopholes for corporations and the wealthy.

[image]https://kos.salsalabs.com/o/60000/images/Facebook%20taxes%20image-1.jpg[/image]

To the 113th Congress:

It's time to reform our tax code to close loopholes for corporations and the wealthy that absolve them of paying their fair share. You must address this in any fiscal showdown deal.

Sign the petition



DesideriScuri -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/14/2013 11:56:31 AM)

quote:

ORIGINAL: kalikshama
For links and to read more, see http://www.forbes.com/sites/robertwood/2013/02/19/tax-increases-why-facebooks-billion-dollar-income-isnt-taxed-at-all-by-irs/


From your Forbes like, there is another link that was an interesting read.
    quote:

    You won’t find any $429 million tax refund in Facebook’s financial statements. Indeed, the company says it had a $559 million federal tax liability in 2012. But that liability isn’t an actual payment. In a footnote, the company also said that it had a $1.03 billion “excess tax benefit” last year related to “stock option exercises and other equity awards.” That benefit is what flips the federal tax liability into a refund. (A small portion is applied against state taxes.)


Essentially, they overpaid their taxes (related to the vesting of stock options) by $1.033B in 2012. And, because of that, their $559B liability is changed to a $429B refund. They are being refunded money they weren't legally required to pay in 2012.

Another good article (also linked from the Forbe's article).

Twisting things around to make things look worse than they already are isn't honest, kali.



DomYngBlk -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/14/2013 12:25:24 PM)

I think she was pointing out he hypocrisy of shutting off Head Start and Free Breakfast programs in favor of giving Facebook a 429M refund. As a "christian", "god fearing" nation it seems a bit off kilter.



JeffBC -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/14/2013 1:39:26 PM)

So the way I'm reading this Facebook wanted to give a bunch of stock options to it's executives that it couldn't afford so the taxpayers have picked up the tab.

Hold on, I want to give some "stock options" to Carol to the tune of 30 or 40 million. I'm sure the IRS will be happy to allow me to deduct them, right? LOLOL



DesideriScuri -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/14/2013 3:37:38 PM)

quote:

ORIGINAL: JeffBC
So the way I'm reading this Facebook wanted to give a bunch of stock options to it's executives that it couldn't afford so the taxpayers have picked up the tab.
Hold on, I want to give some "stock options" to Carol to the tune of 30 or 40 million. I'm sure the IRS will be happy to allow me to deduct them, right? LOLOL


They couldn't afford? The taxpayers didn't pick up any tab. They haven't gotten back more than they've paid in. They paid in $1.033B more than they were supposed to in 2012. Their liability was $559M, but having already paid in $1.033B, they are getting the rest of what they inaccurately paid in back. If you're getting a refund, this is no different than for you (in principle, unless you are dealing the same size numbers; I know I'm surely not).

So, their tax liability was $559M on $1.1B in profits. Quick math tells me their liability was damn near 50% of their profits. They still paid $559M, their tax liability.

I didn't know, which was brought up in the articles, that business could "bank" overpayments and use them at later times (they are sitting on over $2B in tax overpayments that they can use to lower their end of the year liability).



OrionTheWolf -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 1:19:46 AM)

~FR~

The simple version

Facebook made 1.1 Billion Dollars in pre-tax profits.

Throughout the year Facebook entered a tax liability of $559 million.

Since they gave stock options to executives they were able to claim expenses which dropped their taxable profits and entitled them to $429 million refund.

By paying execs in stock options they were able to reduce their tax burden.

Now those stock options will be taxed when the execs make a profit on them, but it does raise a legitimate question on why this is allowed by corporations at all.

If I got this incorrect, then can someone tell me how much tax FB paid on the $1.1 Billion in profits?

BTW, it is not just FB that did this or does this, but many large American Corporations. I agree that the tax code needs to be revised on a massive scale.



DesideriScuri -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 5:58:14 AM)

quote:

ORIGINAL: OrionTheWolf
~FR~
The simple version
Facebook made 1.1 Billion Dollars in pre-tax profits.
Throughout the year Facebook entered a tax liability of $559 million.
Since they gave stock options to executives they were able to claim expenses which dropped their taxable profits and entitled them to $429 million refund.
By paying execs in stock options they were able to reduce their tax burden.
Now those stock options will be taxed when the execs make a profit on them, but it does raise a legitimate question on why this is allowed by corporations at all.
If I got this incorrect, then can someone tell me how much tax FB paid on the $1.1 Billion in profits?
BTW, it is not just FB that did this or does this, but many large American Corporations. I agree that the tax code needs to be revised on a massive scale.


Not exactly. They paid for the vesting of stock options because of the IPO.
    quote:

    When Facebook went public in 2012, it triggered vesting provisions in restricted stock units it had granted prior to January 1, 2011.
    So Facebook and its employees got hit with a massive tax bill, all at once, for four years' worth of stock-based compensation. And Facebook wrote a big check to the government in November on behalf of its employees.
    Facebook's annual 10-K report doesn't break out the exact amount, but said it incurred a $1.13 billion obligation related to stock-based compensation and related payroll taxes.


    SOURCE


So, all the money they are getting back ($429M) is the difference between what they have already paid in, and what the tax code states they are legally required to pay in ($559M).

If you got a refund from your taxes, this is the same thing. You paid in more than your legal obligation. You get the difference back.



JeffBC -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 6:02:36 AM)

quote:

ORIGINAL: OrionTheWolf
Since they gave stock options to executives they were able to claim expenses which dropped their taxable profits and entitled them to $429 million refund.

the theft in action.

This is one of the things I love about the idea of "incorporation". So long as you suck the money out of it fast enough it's ALWAYS going to run in the red.



DomYngBlk -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 6:10:22 AM)

quote:

ORIGINAL: DesideriScuri

quote:

ORIGINAL: OrionTheWolf
~FR~
The simple version
Facebook made 1.1 Billion Dollars in pre-tax profits.
Throughout the year Facebook entered a tax liability of $559 million.
Since they gave stock options to executives they were able to claim expenses which dropped their taxable profits and entitled them to $429 million refund.
By paying execs in stock options they were able to reduce their tax burden.
Now those stock options will be taxed when the execs make a profit on them, but it does raise a legitimate question on why this is allowed by corporations at all.
If I got this incorrect, then can someone tell me how much tax FB paid on the $1.1 Billion in profits?
BTW, it is not just FB that did this or does this, but many large American Corporations. I agree that the tax code needs to be revised on a massive scale.


Not exactly. They paid for the vesting of stock options because of the IPO.
    quote:

    When Facebook went public in 2012, it triggered vesting provisions in restricted stock units it had granted prior to January 1, 2011.
    So Facebook and its employees got hit with a massive tax bill, all at once, for four years' worth of stock-based compensation. And Facebook wrote a big check to the government in November on behalf of its employees.
    Facebook's annual 10-K report doesn't break out the exact amount, but said it incurred a $1.13 billion obligation related to stock-based compensation and related payroll taxes.


    SOURCE



So, all the money they are getting back ($429M) is the difference between what they have already paid in, and what the tax code states they are legally required to pay in ($559M).

If you got a refund from your taxes, this is the same thing. You paid in more than your legal obligation. You get the difference back.


Missing the point again. It is stipulated that it is in the tax code therefore owed back to FB. What is at issue is the hypocrisy of having it there in the first place as corporate welfare.



DesideriScuri -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 9:00:26 AM)

quote:

ORIGINAL: DomYngBlk
Missing the point again. It is stipulated that it is in the tax code therefore owed back to FB. What is at issue is the hypocrisy of having it there in the first place as corporate welfare.


I'm not missing the point at all. I think you are (and I also think you conveniently continue to forget what I think regarding taxation). Look at the subject line: "Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS"

*If they paid taxes in, they were taxed.

*If they had a $559M liability, they were taxed.

*If they paid in more than they had to, netting a refund, they were still taxed.

All 3 happened. All 3 are valid. They are taxed. They paid in over $1B more than they were supposed to. How much did they pay in? I'm not sure, but, here's what they paid in for those stock options:
    quote:

    Facebook's annual 10-K report doesn't break out the exact amount, but said it incurred a $1.13 billion obligation related to stock-based compensation and related payroll taxes.
    Additionally, Facebook withheld $2.86 billion in stock granted to employees to satisfy those employees' tax obligations. (This wasn't tax owed by or paid by Facebook; instead, Facebook withheld it from employees' compensation and paid it directly to the government, the way taxes are regularly withheld from paychecks.) Here's what Facebook said about that in its annual report:

      We settled 279 million of Pre-2011 RSUs in 2012 of which 273 million RSUs were net settled by withholding 123 million shares, which represented the employees' minimum statutory obligation for each such employee's applicable income and other employment taxes and remitted cash totaling of $2.86 billion to the appropriate tax authorities.


They incurred a $1.13B obligation (taxes). They paid $2.86B to the "appropriate tax authorities." Apparently, that comes out to a $1.033B overpay to the IRS (I'm assuming the difference between the obligation and the IRS overpay went to the State Government). That's for the stocks. Business taxes were $559M on $1.1B in pre-tax profits. 559/1100 = 50.8%. That's the taxes owed compared to pre-tax profits.

So, let's add this up (Red is liabilities; Green is for payments):

    RSU obligation ..... $1,130M
    RSU payment ...... $2,163M (modified simply to show the $1.033B overpayment)
    Business taxes ....... $559M

    Net total ............... $474M

    In essence, the total liabilities FaceBook had for 2012 to the IRS was $1.689B.

    Now, look at the subject line again. How is it accurate to say they aren't taxed at all by the IRS when they had to pay in $1.689B?



DomYngBlk -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 9:16:47 AM)

Ok great, I looked at the line and what was written. Again, you are missing the point. If it is within the tax code that they should get their millions, so be it. The problem is there shouldn't be a tax benefit such as this when we are "alledgedly" broke. Should there? Or are you going to start talking about of both sides of your mouth once again



DesideriScuri -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 10:20:10 AM)

quote:

ORIGINAL: DomYngBlk
Ok great, I looked at the line and what was written. Again, you are missing the point. If it is within the tax code that they should get their millions, so be it. The problem is there shouldn't be a tax benefit such as this when we are "alledgedly" broke. Should there? Or are you going to start talking about of both sides of your mouth once again


Both sides of my mouth? LMAO!!! What are my beliefs about the tax code? Here, I'll even limit it to what are my beliefs outside of a consumption tax?

Now, do me a favor and think to yourself what would be the result if FaceBook paid only the $1.13B liability. What would their tax liability be on the $1.1B pre-tax profits? Come on, I know you can do it...



DomYngBlk -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 1:08:39 PM)

You are still missing the point. It isn't about a dime of what FB paid or didn't pay. It is about the fact that the code allows it in the first place when we are supposedly bankrupt and need to cut spending.

I don't have a clue about your beliefs on the tax code. what you believe seems to change from thread to thread...



DesideriScuri -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 3:39:52 PM)

quote:

ORIGINAL: DomYngBlk
You are still missing the point. It isn't about a dime of what FB paid or didn't pay. It is about the fact that the code allows it in the first place when we are supposedly bankrupt and need to cut spending.
I don't have a clue about your beliefs on the tax code. what you believe seems to change from thread to thread...


Face it. You're way the fuck over your head here. I haven't changed my opinions on tax code issues for quite some time now.

You bitch about Facebook not paying their share, and I show that they actually paid 50.8% of their pre-tax profits. They had $1.1B in pre-tax profits and ended up paying $1.72B in 2012. They paid $620M more than they made in profits.

Instead of cutting spending, spending is continuing to go up and up and up. Why? Because they don't have to stop spending. They have people out there who have no idea what is actually going on, drink down the Kool-Aid and spit out the same rhetoric time and time and time and time again. Do me a favor and don't ever respond to any of my posts. You aren't worth the time.



tj444 -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 3:54:17 PM)


quote:

ORIGINAL: OrionTheWolf
it does raise a legitimate question on why this is allowed by corporations at all.


why does the govt allow Americans to deduct their mortgage interest at all? imo its the same thing.. but few Americans sign petitions or squawk about that.. sorta funny how that works.. [:D]



DomYngBlk -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 5:01:45 PM)

quote:

ORIGINAL: DesideriScuri

quote:

ORIGINAL: DomYngBlk
You are still missing the point. It isn't about a dime of what FB paid or didn't pay. It is about the fact that the code allows it in the first place when we are supposedly bankrupt and need to cut spending.
I don't have a clue about your beliefs on the tax code. what you believe seems to change from thread to thread...


Face it. You're way the fuck over your head here. I haven't changed my opinions on tax code issues for quite some time now.

You bitch about Facebook not paying their share, and I show that they actually paid 50.8% of their pre-tax profits. They had $1.1B in pre-tax profits and ended up paying $1.72B in 2012. They paid $620M more than they made in profits.

Instead of cutting spending, spending is continuing to go up and up and up. Why? Because they don't have to stop spending. They have people out there who have no idea what is actually going on, drink down the Kool-Aid and spit out the same rhetoric time and time and time and time again. Do me a favor and don't ever respond to any of my posts. You aren't worth the time.



Just trying to correct your misconception of the OP. You want to wallow in ignorance who am I to stop you. I am not bitching about FB getting money back. I am bitching about anyone getting a special favor when were are "broke". Aren't we broke? Don't you think we should balance budget? What the fuck have you been whining about over and over and over again each time you open a page. stop spending.

Well we put something in front of you that will help stanch the spending and what do we get? YOU not wanting to stop spending. Gotta say I am not surprised. Its always the other persons spending you want to stop not your own.......

Anyway, you want to look like a moron day after day, have at it.



OrionTheWolf -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 6:17:57 PM)

quote:

ORIGINAL: DesideriScuri

quote:

ORIGINAL: DomYngBlk
Missing the point again. It is stipulated that it is in the tax code therefore owed back to FB. What is at issue is the hypocrisy of having it there in the first place as corporate welfare.


I'm not missing the point at all. I think you are (and I also think you conveniently continue to forget what I think regarding taxation). Look at the subject line: "Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS"

*If they paid taxes in, they were taxed.


I did not see a statement that said they paid any tax.

quote:


*If they had a $559M liability, they were taxed.


A liability is not paid yet, it is just owed. If it were paid then it would be an expense. So, based upon the statement they recorded they would owe $559 million throughout the year. When it came tax time they actually didn't owe and got a refund of $442 million. I would need some clarification to ascertain what was paid or refunded.

quote:


*If they paid in more than they had to, netting a refund, they were still taxed.


Actually the other part is if they had enough credits they could actually get back more than they thought they would owe, and that seems like what is happening, but again I would need more information than what they are giving.

quote:


All 3 happened. All 3 are valid. They are taxed. They paid in over $1B more than they were supposed to. How much did they pay in? I'm not sure, but, here's what they paid in for those stock options:
    quote:

    Facebook's annual 10-K report doesn't break out the exact amount, but said it incurred a $1.13 billion obligation related to stock-based compensation and related payroll taxes.


    This is tweaking their pockets on the exec side. Run the bonuses, stock options, etc. at the same amount of profit so that the tax burden is zero. That is something many very large corporations have done to avoid paying taxes at the corporate level. It is using the existing tax code. Some feel that is not right, and want that changed.

    quote:


    Additionally, Facebook withheld $2.86 billion in stock granted to employees to satisfy those employees' tax obligations. (This wasn't tax owed by or paid by Facebook; instead, Facebook withheld it from employees' compensation and paid it directly to the government, the way taxes are regularly withheld from paychecks.) Here's what Facebook said about that in its annual report:

      We settled 279 million of Pre-2011 RSUs in 2012 of which 273 million RSUs were net settled by withholding 123 million shares, which represented the employees' minimum statutory obligation for each such employee's applicable income and other employment taxes and remitted cash totaling of $2.86 billion to the appropriate tax authorities.


They incurred a $1.13B obligation (taxes). They paid $2.86B to the "appropriate tax authorities." Apparently, that comes out to a $1.033B overpay to the IRS (I'm assuming the difference between the obligation and the IRS overpay went to the State Government). That's for the stocks. Business taxes were $559M on $1.1B in pre-tax profits. 559/1100 = 50.8%. That's the taxes owed compared to pre-tax profits.

So, let's add this up (Red is liabilities; Green is for payments):

    RSU obligation ..... $1,130M
    RSU payment ...... $2,163M (modified simply to show the $1.033B overpayment)
    Business taxes ....... $559M

    Net total ............... $474M

    In essence, the total liabilities FaceBook had for 2012 to the IRS was $1.689B.

    Now, look at the subject line again. How is it accurate to say they aren't taxed at all by the IRS when they had to pay in $1.689B?


The terminology that is used is confusing, if I look at it from an accounting or tax perspective. They mention paying a liability of employee taxes, and then further confuse things by speaking of dual year taxes being paid.

The total liabilities could easily be mixed amounts as they are not separated. I will wait till the tax return is public and look at it myself.

It looks like FB is using the existing tax code to reduce tax burden at the corporate level and shift it to the individual receiving the stock options. What some companies also do is calculate the expected amount of tax and increase the bonus accordingly so that they get the tax break on the corporate side.



OrionTheWolf -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 6:19:25 PM)

If you look at when it was put in you will have your answer, but your comment does not relate to the subject of the OP.


quote:

ORIGINAL: tj444


quote:

ORIGINAL: OrionTheWolf
it does raise a legitimate question on why this is allowed by corporations at all.


why does the govt allow Americans to deduct their mortgage interest at all? imo its the same thing.. but few Americans sign petitions or squawk about that.. sorta funny how that works.. [:D]




DesideriScuri -> RE: Tax Increases? Why Facebook's Billion Dollar Income Isn't Taxed (At All) By IRS (3/15/2013 7:40:29 PM)

quote:

ORIGINAL: DomYngBlk
Just trying to correct your misconception of the OP. You want to wallow in ignorance who am I to stop you. I am not bitching about FB getting money back. I am bitching about anyone getting a special favor when were are "broke". Aren't we broke? Don't you think we should balance budget? What the fuck have you been whining about over and over and over again each time you open a page. stop spending.
Well we put something in front of you that will help stanch the spending and what do we get? YOU not wanting to stop spending. Gotta say I am not surprised. Its always the other persons spending you want to stop not your own.......
Anyway, you want to look like a moron day after day, have at it.


Next time you want to attempt to correct my misconception, you should make sure there is actually a misconception on my part, and make sure you have a fucking clue and not have the misconception yourself.

Tax breaks are not spending, either. That's ludicrous thinking. That type of thinking means that all money is Government's and any money anyone or anything has at the end of the year is but a gift from Government. Completely and utterly wrong.

So, what was the point of the OP when the subject line states that the IRS isn't taxing Facebook at all?

How much did we have in tax revenue in 2011 (I'd ask for 2012 numbers, but I haven't seen anything outside of estimates yet)? How much did we have in spending in 2011? How much of each did we have in 2001? 2005? 2009?

Spending is money going out. Spending is money that has come in via the tax code that is being spent on something.

And, since you apparently have no memory for these things, let me spell my tax idea I have (outside of a consumption tax): Close all the loopholes. Every single one of them. Across the board. All of them. My biggest change regarding taxes? I could get behind the call for all income to be treated the same way, regardless of where it comes from.



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