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Facebook reported $1.1 billion in pre-tax profits from U.S. operations in 2012, but it actually paid zero federal and state taxesand even receive a federal tax refund of about $429 million.
The tax footnotes in Facebooks Jan. 30 financial statement is an amazing admission & theres nothing illegal about it. Companies like Facebook are allowed to treat the cost of non-cash compensation, such as stock options, as an expense that reduces profits, essentially the way they treat cash compensation such as salaries.
You wont find any $429 million tax refund in Facebooks financial statements. Indeed, the company says it had a $559 million federal tax liability in 2012. But that liability isnt 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.
Facebook executives conference call with analysts. On the call, Chief Financial Officer David Ebersman cited the accumulated tax benefits and noted that the company ended the fiscal year with nearly $10 billion in cash and investments, giving us great flexibility and risk protection.
