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Last year the Facebook corporation made headlines when it used a single tax break—the ability to write off part of the value of executive stock options—to eliminate every last dime of federal income tax on $1 billion in US income in 2012. But for Facebook and other emerging tech companies—including Twitter, whose IPO is scheduled for this week—the best is yet to come.
A new CTJ report shows that a dozen emerging tech companies have stockpiled enough un-used tax breaks for executive stock options to eliminate all income taxes on the next $11.4 billion of US income they collectively earn—which means a net federal tax cut of $4 billion for these twelve companies.
There are familiar names here for any Internet user. LinkedIn is set to zero out tax on $571 million of US income. Priceline can expect to pay no tax on $900 million of income, and Facebook will likely be able to avoid any tax on a whopping $6.2 billion of income.
As CTJ has previously documented, hundreds of Fortune 500 companies have already used lavish executive stock options as a tax dodge. Apple alone has saved a breathtaking $3.2 billion in the last three years from this single tax break. Happily, pending legislation sponsored by Senator Carl Levin (D-MI) would pare back the stock option break to a degree. The most sensible long-term step would be to repeal the stock option tax break entirely, but Levin’s bill is a welcome step in that direction.