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.<p>But Mark Zuckerberg's company will also get a multimillion dollar tax refund of around $429 million according to Citizens for Tax Justice (CTJ).<p>The refunds reportedly come from tax deductions on executive stock options and share awards.
At first I thought the Daily Mail was getting things wrong (as usual), but a quick Google search shows that they are actually not exaggerating in this instance.<p><a href="http://www.nytimes.com/2011/12/30/business/tax-breaks-from-options-a-windfall-for-businesses.html?pagewanted=all&_r=0" rel="nofollow">http://www.nytimes.com/2011/12/30/business/tax-breaks-from-o...</a>.<p>Basically, companies get a deduction for stock options based on when the options are exercised, not when they are given out (but record the options on their books at the value when given). Thus, options given out at low values (i.e., during the recession), generally result in a tax windfall to the company.<p>Surprisingly, this tax quirk survived the Great Recession and the fiscal crisis and is still on the books.