Facebook is getting a tax refund of about $429 million, which means the world’s largest social media will not pay anything to the IRS in 2012 despite earning more than $1 billion in profits.
The refunds for Mark Zuckerberg’s company reportedly come from tax deductions on executive stock options and share awards.
Facebook released its first annual report as a public company on January 30 after floating in May 2012.
Some financial analysts find it amazing that the company didn’t pay a dime in federal and state income taxes.
Facebook reported that it had a $559 million federal tax liability in 2012, but their refunds on the tax deductibility of stock options reduced the company’s federal and state income taxes by $1.03 billion for the year, including refunds of earlier years’ taxes of $451
After a small portion is applied to state taxes, this benefit turns Facebook’s liability into a refund. Yet, the social media network had further stock-option tax breaks that the company generated from its initial public offering of stock (IPO). Facebook is hoping to reduce future tax liability by carrying forward another $2.17 billion in additional tax-option tax breaks for use in the years ahead.
Facebook delivered fourth-quarter results above Wall Street’s expectations on January 30 and sought to show that it has finally transformed into a “mobile company” after rising to dominance as a Web-based social network.
However, its stock dropped in after-hours trading as investors placed more significance on the company’s growing expenses rather than on its increasing user base and higher advertising revenue.
“Everything was slightly better than expected,” said Wedbush Securities analyst Michael Pachter. “I don’t see anything here that would make me want to sell the stock.”
Nonetheless, Facebook’s stock fell $1.11, or 3.6 percent, to $30.13 in after-hours trading following the earnings report.