This page has been archived and commenting is disabled.
Facebook, The Coolest Cutest Corporate Welfare Queen Of Them All
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
Last year, the government extracted $1.1 trillion in taxes from us more or less hardworking individual taxpayers. But now it will pay, along with the states, $429 million of our taxes to the coolest Silicon-Valley beauty queen: Facebook. In net tax refunds! Part of a vast package of juicy corporate welfare programs. Facebook isn’t just hogging our data; it’s gobbling up our money.
Timing was a bit inconvenient, however. The “sequester,” as the automatic spending cuts by the federal government have been elegantly named, is scheduled to kick in on March 1. A national disaster, according to the New York Times. It would threaten everything from national security to preschool programs for low-income kids. It would cause hundreds of thousands of jobs to evaporate, or whatever. Clearly, trying to live within one’s means, or at least a modest step closer to it, is never a healthy idea.
So, as the drama with all its lurid theatrics was playing out in Washington, Facebook filed its first 10-K annual report with the SEC, containing its financial statements for 2012 along with a host of small-print footnotes which presumably no one would ever look at. But the recalcitrant nonpartisan research and advocacy group, Citizens for Tax Justice, combed through it anyway.
And it found “an amazing admission”: despite $1.1 billion in pre-tax profits from its US operations in 2012, Facebook didn’t pay any federal or state income taxes in the US—in fact it will collect net tax refunds totaling $429 million.
Facebook is relying on a single tax break in our glorious corporate tax-dodge code to obtain its negative tax rate: the deductibility of executive and employee stock options. It cut Facebook’s federal and state income taxes by $1.03 billion last year—but that was just part of it. As Facebook said in its footnote under “Share-based Compensation,” on page 68 of the 10-K: “during the years ended December 31, 2012, 2011, and 2010, we realized tax benefits from share-based award activity of $1.03 billion, $433 million, and $115 million respectively.”
Another $2.17 billion of this US tax break is carried forward. To rub it in, COO Sheryl Sandberg giddily pointed out during the earnings call that the company “ended the year with a total of $5.8 billion in NOL tax loss carry forwards created by stock compensation”—to be used in future years.
Given Facebook’s anemic “profits” in the US, it’s unlikely that it will have to pay federal or state income taxes anytime soon. Instead, taxpayers will have to continue showering tax refunds on what has become the cutest, coolest welfare queen of them all [but it does have its share of not-so-real-world issues, like this one: Is The “Self-Promotion-And-Envy Spiral” Taking Down Facebook?].
On its financial statements, Facebook claimed that it had a federal tax liability in 2012 of $559 million, that it would somehow pay $559 million in taxes in the coming year. But the number was wiped out by its infamous footnote on page 68 of the 10-K. And suddenly, that “federal tax liability” of $559 million had, like so many things on financial statements, no graspable relationship to reality.
Facebook isn’t the only one sucking on the big government teat. The tax break is available to all companies where stock-based compensation plays a big role. And innumerable other tax breaks are available as well. In its Corporate Tax Dodgers report of November 2011, the CTJ found that 30 of the 280 most “profitable” companies for the tax years 2008-2010 paid no income taxes but instead collected net tax refunds on their combined pre-tax profits of $160 billion! And 78 of them had at least one year when they didn’t pay taxes. At the same time, other companies in the study were getting whacked by huge tax bills. Hence the inherent unfairness of the corporate tax-dodge code.
So, CEO Mark Zuckerberg was raving about the limitless opportunities of mobile during the earnings call. “We have more engagements from the people who we reach, and I think we’ll also be able to make more money for each minute people spend with us on their mobile devices,” he said. But it just won’t contribute to the convoluted and painful process of reducing the US budget deficit.
Meanwhile, corporate insiders rotate in and out of various government agencies that are supposed to regulate them. Perhaps the most egregious example is the SEC, where Wall Street culture and personalities have come to dominate. Regulation and enforcement have become a joke. A principle so common that it has a name: “Regulatory Capture.” Read.... Wall Street Takes Over Its Regulator
»
- advertisements -
watch how quickly the corporation gets dissolved.
Sorry, that doesn't happen. The corporation is not dissolved, but is rather placed in "Non-compliant" status by the state's Dept of Revenue. None of its actions have legal force until the non-compliance issue is addressed. I have property in an HOA corporation that hasn't filed a report or paid its fee in three years, and it's still there on the books, wallowing in its non-compliant state.
Non-compliance could go a long way toward getting the attention of our honorable elected "representatives".
Ya, and people can starve to death too.
AN execution is specifically a punishment for a crime. The kinds of crimes other living humans also can be punished for.
Man, I'd pay big money to see that!
But the individual recipients owe taxes on the compensation when they sell their stock, right? And, double taxation is bad, right? So, which part of the tax dodge do we end? Get it upfront from the corporation or on the back end form the recipients?
But they said our economy is bad because income taxes are too high on the "job creators".
At every turn it all becomes more and more disgusting.
No, the taxes are too high on the job creators that didn't give tons of money to the lobbyists, in order to funnel it to the politicians dummy.
Thank God we live in the greatest country in the world and enjoy these wonderful free markets! /sarc
It’s all about making a handful of people uber rich at the expense of everyone else. You don’t even need to create a profitable company to do it anymore. Just line yourself up with a bunch of accountants, lawyers, Wall Street banksters, and government prostitutes to back you up.
One has to wonder why the same Mark Zuckerberg and Sheryl Sandberg who insisted to the investor world that their IPO was undervalued at $38 per share have been so happily selling their shares at substantially less ever since. Hypocritical much? When was the last time you sold shares of anything for less than you thought or said it was worth? At the same time, they have overpaid for every acquisition that has brought any shred of value to their company. I guess smart investing doesn’t have anything to do with their so-called success either.
"...they have overpaid for every acquisition..."
no they didnt. their friends got paid a shit load of money when they sold their bs startup. our tax dollars 'paid' for the acquisitions. 'over paid' doesnt even apply here.....
Funny how things don't seem to cost so much when there's no lack of OPM.
And yet people are bitching about raising minimum wage to $9 per hour. Unbefuckinlievable.
What is truly unbelievable is the disconnect necessary to believe that two wrongs make a right.
Minimum wage laws are every bit as destructive as tax laws.
Yet those engaged in these divide and conquer arguments have no need for logic, as emotions provide both the fuel and the justification for any position, regardless of incoherence.
All that matters is that it is done for the "right reasons."
Unbefuckinlievable? Hardly...
Don't be such a retard.
Minimum wage laws are EVIL, as they remove the marginal worker from the labor force.
I realize that reality has a hard time competing with ignorance based wishful thinking, but unicorns and fairies won't make this economy do anything but get worse.
The reality is that if there is no minimum wage & there is suffering in poverty, the poor will kill you and eat you.
Is that what you want?
They'll butcher your children right in front of you.
Is that what you want?
You're mistaken. The reality is that without a minimum wage, all but the truly helpless and fully disabled are employable. Without a minimum wage, there are jobs for people whose skills cannot justify $9--PLUS ALL OTHER EMPLOYEE COSTS, remember--but who might justify their employment at $7.
Without a minimum wage, there's probably even someone who would employ you.
Just keep putting that blindfold on. Look around you at the milling sheep. Look at what happens when they can't get what they want, but worse, when they see others getting those things.
Come on, you know what will happen.
It's really easy to argue down a wage whose purchasing power is too high, but with minimum wage we're talking about such a low purchasing power one typically can't survive day to day on it and yet some employers want to offer less even so.
That's kicking people in the balls. It's asking for trouble.
Some labour markets & some employers try deliberately to make workers more helpless making the work itself more complex or volatile - not more efficient - for the pure purpose of making the workers less able to argue for any wage sustainability. Not just increases but even keeping hours. Not innovation, just screwing with people the same way HFT screws with our pricing & of course quotes.
As for my job, mocking my job, I think you'd like my job. I rarely discuss it because I think it's better people just look at the jokes 'n' stuff I post.
All those nice fancy earnings calls you all have to suck dick for to get an invite to?
No invite needed for me.
I work in such a conference center & I listen to ALL the calls. I don't repeat what's in them but I hear it. ALL of it. EVERY major bank. EVERY major ticker on NASDAQ.
You'd pay $200/hour to sit in my seat every day. They pay ME to be there.
It's actually a funny quiet game to myself to see when Zerohedge out-guesses what will be in this call or that, or to see when I read it in ZH after happening on said call in the course of normal work.
It's amazing what you can learn about the macro-scope of where people really are on which side of this boat or that. Big, big picture. I know all the brands of snake oil being sold & who's doing the selling. And we all know what Jim Rogers says about which side of the boat to be on. And we DEFINITELY know what to do with our boats on zerohedge, don't we?
You'd pay $200/hour to sit in my seat every day.
Dream on. I'm sitting in my house robe in front of the fire this very moment, at 11 a.m. I don't have to listen to all that insipid crap you're tuned into. I can spend the day listening to Fleetwood Mac and Marc Faber if I like.
So keeping the minimum wage at the present level is "kicking people in the balls" but forcing them into unemployment is not? Because that's what happens. Since 2007 we've raised the minimum wage from $5.15 to $7.25 per hour. And we have more than eight million fewer people working in the U.S. since then.
That worked well.
I don't think you understand. I hear a lot more than the quasi-public pablum dispensed to the conferences, which is enough to know how much snake-oil is to be sold & how badly they want to sell it. I also hear the private talk before the conferences begin. Faceplant, all the big banks, everything, anything, so yes, you'd pay $200/hour to hear it because it's the inside information on everything.
Agree. Milton F. was right. It's all evit.
Wolf, about that raw horsemeat in Japan.
Three years ago two colleagues and myself had one of those raw horsemeat dishes in Nagano Prefecture. My boss drew the short straw, or worm in this case, and got toxiplasmosis from it. He ended up going to the Mayo Clinic to be diagnosed.
The late Queen of Mean, Leona Helmsley stated a truth, "Only little people pay taxes".
only dwarfs pay taxes...thats so unfair!
Not justs dwarves, but midgets and leprechauns, too.
this kind of shit doesnt even phase me now. i expect it.....bring it on. lets double down and go no limit on the debt ceiling. let QE double down also....!
You sound like one of those 'crazy' gold bugs ;) and so right you are. Paper is on fire, literally, and it will all end in a very large pile of ash. The ash will be so thick that you will choke on it no matter your geographical location. We're all going to need metaphorical masks to breath - might I suggest PM? .. I might.
ZuckerBERG
Sheryl SandBERG
I see a pattern just like ein.
I wonder how much of our tax dollars went to bergs and eins?
Exactly where does that little sociopath hang out in Palo Alto?
http://www.ksbw.com/news/central-california/santa-cruz/Mark-Zuckerberg-spotted-hanging-out-in-Santa-Cruz/-/5738976/18238560/-/rmpc5i/-/index.html
The real question is...
How many times has SuckerTurd slept in the Lincoln Bedroom in the last 4 years?
Flat tax, bitchez!
How 'bout removing the punchbowl instead?
A no tax regime would still leave FB $429M poorer this year.
How bout shittin in their punchbowl then makin them drink it?
this just in...from MERIKAN FREE PRESS...
How bout shittin in their punchbowl then makin them drink it?
this just in...from MERIKAN FREE PRESS...
You have to give them that, that is good 'american' business.
Agreed, because the business of America is fraud.
fraudbook
aboutfacebook
So... I wonder how many shell companies exist to exploit this "loophole?"
99% (the inverse of the 1%er's.)
Surveilancebook.