So much for boot-strapping.
Facebook Inc. is done with the pretense of Silicon Valley meritocracy and has moved on to Corporate American crony capitalism taking a multimillion dollar tax break according to Citizens for Tax Justice.
Last year at this time, CTJ predicted, based on Facebook’s IPO paperwork, the company would get a federal tax refund in 2012 approaching $500 million, and the company’s SEC filing this month tells us we were right: Facebook is reporting a $429 million net tax refund from the federal and state treasuries. And it’s not because they weren’t profitable. Indeed, Mark Zuckerburg’s little company earned nearly $1.1 billion in profits…
Facebook’s income tax refunds stem from the company’s use of a single tax break, that is the tax deductibility of executive stock options. 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.
So a company that makes money by providing a platform for people to mindlessly give away lifestyle consumption information for free is now gaming the tax code. And according to Facebook executives this is just the beginning of their free ride.
Facebook says that it anticipates reducing its tax liability in the future by an additional $2.17 billion by using further net operating loss carry-forwards that it has banked.
Meanwhile back in Washington we are having a surreal serious discussion on lowering Corporate Tax rates. This is of course being sold as both pro-business and more fair as a closing of loopholes will accompany the lower rates – unlikely. What is most likely is the rates will be lowered and the loopholes will stay in because why should corporations pay any taxes really? They are job creators somehow.
Perhaps it is time to revisit the increasingly less evidenced proposition that Silicon Valley companies are net contributors and somehow different than the rest of the corporate sector. If they want the goodwill of the public instead of bloviating about how great their new tech is perhaps they should fulfill their responsibilities within our national social network, like paying their taxes.
Photo by Guillaume Paumier under Creative Commons license.