Senators target Facebook with bill that would close stock-option loophole

By Jia Lynn Yang,
Published: February 29

Facebook executives with lucrative stock options, aren’t the only ones set to benefit from the company’s highly anticipated debut on the stock market this spring. The social media juggernaut stands to save billions of dollars on its tax bill, as well.

Sens. Carl Levin (D-Mich.) and Kent Conrad (D-N.D.) introduced a bill Wednesday that would close what they called a significant loophole in the country’s tax code, which allows companies to take a hefty deduction when employees cash in their stock options.

Facebook anticipates its deduction will be so large that it will wipe out the company’s tax obligations for all of 2011, according to the firm’s regulatory filing for its initial public offering. The company also expects to get as much as $500 million in refunds applied to the taxes it paid over the last two years.

All of this is legal. Under current law, companies can take a deduction when employees cash in stock options. The thinking is that compensating employees with stock options is an expense for companies that the government wants to offset.

(More here.)