Yes, I saw the story. Drudge is pushing the headline like it's something new or special for Facebook, but it's not. Tech companies have been using this tax break for years.
The tax law says that if a corporation issues options for employees to buy the company’s stock in the future for its price when the option issued, then if the stock has gone up in value when employees exercise the options, the company gets to deduct the difference between what the employee bought it for and its market price.
DB. Here is a stupid question. In the past I have read accounts of where executives of large corporations had exercised the stock options of companies when the price was at it's absolute peak, this actually had happened a lot in the past. Isn't this considered to be fraudulent in any way and also then would help the company in that they can claim absolute maximum tax benefit that would actually help the companies achieve tax refunds? So then the average schlub such as myself has to make up the difference they get back in higher sales taxes property taxes and such. Are our so called elected officials that damned blind to this? Just WTF? Thanks for the links.
Your instincts are correct. I'm not sure it's fraudulent any more than the law itself is fraudulent. Stock options are a part of salary and should be treated as such. It's the Silicon Valley tax loophole bought, paid for, and administered by K Street.
Here's a good piece on Greg Reyes, former CEO of Brocade, who was the only CEO prosecuted for 'backdating' stock options, even though more than 100 companies violated the obscure law, including, Apple, Oracle, Microsoft, etc. But the DOJ went after Greg Reyes and only Greg Reyes and sent him to prison.
Ha! SNL predicted the first black president being a muslim. Funny how Obama mistakenly refered to himself as a muslim, only to be corrected by George Snuffleupagus.
Reader Comments (7)
Yes, I saw the story. Drudge is pushing the headline like it's something new or special for Facebook, but it's not. Tech companies have been using this tax break for years.
Here's the story:
http://www.businessweek.com/articles/2013-02-15/facebook-gets-a-multi-billion-dollar-tax-break
The tax law says that if a corporation issues options for employees to buy the company’s stock in the future for its price when the option issued, then if the stock has gone up in value when employees exercise the options, the company gets to deduct the difference between what the employee bought it for and its market price.
http://www.ctj.org/taxjusticedigest/archive/2013/02/facebook_status_update_a_429_m.php
http://ctj.org/ctjreports/2013/02/facebooks_multi-billion_dollar_tax_break_executive-pay_tax_break_slashes_income_taxes_on_facebook--.php
How 185 other large, profitable companies have exploited the stock option loophole.
http://www.atlassociety.org/brc/greg-reyes-justice-denied
http://www.huffingtonpost.com/michael-santos/greg-reyes-convicted_b_1035290.html