[Congressional Record (Bound Edition), Volume 158 (2012), Part 5]
[Senate]
[Page 7048]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        FACEBOOK'S TAX DEDUCTION

  Mr. LEVIN. Mr. President, tomorrow will be a day in tax history--when 
Facebook goes public, it will get a $16 billion tax deduction, which is 
the largest tax deduction ever taken by any corporation exploiting the 
stock option tax loophole.
  Facebook's recent filings in anticipation of its upcoming stock 
offering provide new facts about its plans to use stock option tax 
deductions, not only to help it avoid future taxes for years and years 
to come, but to get a refund of taxes it has already paid.
  Facebook's recent registration statement shows that, due to hundreds 
of millions of stock options handed out to its founders and top 
executives, it plans to claim stock option tax deductions worth a 
whopping $16 billion. That is more than twice as much as estimates a 
few months ago, and many, many times larger than the stock option 
expenses shown on Facebook's ledgers.
  Facebook is a booming, successful company. Its securities filing 
boasts of double-digit increases in Facebook's average revenue per 
user, citing a 32-percent increase in 2010 and another 25-percent 
increase in 2011, with ``growth across all regions.'' Despite 
trumpeting those revenue increases to investors, Facebook is planning 
at the same time to tell Uncle Sam it has no taxable income, offsetting 
its revenues with stock option tax deductions.
  Facebook's $16 billion stock option tax deduction is so huge, it will 
enable Facebook to claim a $500 million refund of taxes paid over the 
prior 2 years and wipe out this year's tax bill. The company says it 
will also use its deduction to create a ``net operating loss'' that can 
be used to eliminate its profits and its taxes for up to 20 years into 
the future.
  As with so much of our Tax Code, it is not the law breaking that 
shocks the conscience, it is the stuff that is allowed. For years, my 
Permanent Subcommittee on Investigations has identified this stock 
option tax loophole and tried to explain its cost, its unfairness, and 
why the loophole should be closed. Facebook's $16 billion tax deduction 
brings the issue into sharp focus.
  This profitable corporation will stop paying any Federal corporate 
income taxes, simply because it gave hundreds of millions of stock 
options to its executives. It will go from a corporate citizen that 
paid its taxes, to one that not only pays no taxes to Uncle Sam on its 
profits, but gets a tax refund.
  Some Facebook defenders claim the company's nonpayment of taxes is 
offset by the taxes paid by its executives. But first of all, Facebook 
demands and receives government services that its executives don't--
from patent protection to cybersecurity to trade enforcement. Second, 
the fact that executives pay taxes doesn't mean corporations shouldn't 
pay taxes. Facebook should be paying its fair share, and it is only 
through a tax loophole that it won't be. Adding insult to injury is 
that one of its founders recently renounced his U.S. citizenship just 
to avoid paying his taxes.
  Facebook is an American success story. Its ability to use a stock 
option loophole to zero out its U.S. tax bill, despite ample profits, 
makes no sense. It also isn't fair to the rest of American taxpayers 
who will have to pay more because Facebook pays nothing.
  In these tough economic times, Congress needs to make choices about 
where to spend taxpayer dollars. The stock option tax deduction, as 
demonstrated by Facebook, fuels excessive executive pay, shifts the tax 
burden from corporations to other taxpayers, and enables profitable 
corporations to get out of paying a dime toward the country that helped 
make their success possible.
  What could our Nation do with the billions of dollars it will lose 
when Facebook uses the stock option loophole? Well, we could reduce the 
Federal deficit. Or we could pay for programs to help kids go to 
college or programs that protect our seniors and veterans, put cops on 
the beat or teachers in classrooms.
  The stock option loophole should have been closed long before 
Facebook's stock option bonanza. But surely the case of Facebook 
illustrates to the Senate, to the Congress, and to the American people 
why we should close this loophole. If Congress were to enact the Levin-
Sherrod Brown bill, S. 1375, it would close an unjustified corporate 
tax loophole that boosts executive pay at the expense of everybody 
else.

                          ____________________