Senator Carl Levin is sounding the alarm over a tax loophole that could cost the federal government billions of dollars and prop up huge companies like Facebook.
When Facebook goes public later this year, its founder, Mark Zuckerberg, stands to gain 120 million shares for the cool price of just six-cents per share. That's a total cost of about 7-million dollars for the company.
Federal tax law, however, allows Facebook to report the cost of that transaction as being much higher for tax purposes, said Senator Carl Levin...
"When they file their tax returns with Uncle Sam, that corporation will take a $40 a share deduction from their profits, and therefore, they won't be profitable. And they'll, as a matter of fact, get a tax refund for the last couple years."
Levin said instead of having a tax obligation, Facebook will instead be entitled to a deduction that could be worth as much as three-billion dollars.
Similar deductions have been enjoyed by corporations for years and Levin has been trying to ban the practice for nearly as long. He recently reintroduced legislation that would do just that.
But until congress takes up Levin's bill, he said what Facebook is doing is perfectly legal and there's nothing anyone can do about it.
When Facebook goes public later this year, its founder, Mark Zuckerberg, stands to gain 120 million shares for the cool price of just six-cents per share. That's a total cost of about 7-million dollars for the company.
Federal tax law, however, allows Facebook to report the cost of that transaction as being much higher for tax purposes, said Senator Carl Levin...
"When they file their tax returns with Uncle Sam, that corporation will take a $40 a share deduction from their profits, and therefore, they won't be profitable. And they'll, as a matter of fact, get a tax refund for the last couple years."
Levin said instead of having a tax obligation, Facebook will instead be entitled to a deduction that could be worth as much as three-billion dollars.
Similar deductions have been enjoyed by corporations for years and Levin has been trying to ban the practice for nearly as long. He recently reintroduced legislation that would do just that.
But until congress takes up Levin's bill, he said what Facebook is doing is perfectly legal and there's nothing anyone can do about it.
