November 5, 2013 / 8:54 PM / 5 years ago

Stock options may save tech companies billions in U.S. taxes: report

WASHINGTON (Reuters) - Twitter Inc and 11 other technology companies have enough stock-option tax breaks to avoid paying billions of dollars in taxes over the next several years, a consumer group said on Tuesday.

An employee walks past a Twitter logo made from Californian license plates at the company's headquarters in San Francisco, California October 4, 2013. REUTERS/Robert Galbraith

Citizens for Tax Justice, a left-leaning tax activist and research group, said it analyzed U.S. Securities and Exchange Commission 2012 filings for 11 public technology companies and Twitter, which is planning an initial public offering this week.

CTJ said the companies have stockpiled enough unused tax breaks for executive stock options to eliminate all income taxes on the next $11.4 billion of U.S. income they collectively earn.

When employees are paid in corporate stock options, the issuing companies can take a tax deduction for the difference between what the employees pay for the options and what the stocks are worth when the options are exercised years later.

“Tax breaks for executive stock options have become an increasingly effective corporate tax avoidance tool,” CTJ said.

Twitter has $107 million of unused stock option deductions it can apply to future earnings, the report said.

Facebook Inc has $2.2 billion in unused tax breaks that may be used to offset future income, meaning the company’s next $6.2 billion in U.S. earnings could be tax free, CTJ said.

Twitter and Facebook did not immediately respond to requests for comment on Tuesday.

CTJ praised pending legislation sponsored by Senator Carl Levin, a Michigan Democrat, that would pare back the stock option tax break to some extent.

“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,” CTJ said.

Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Dan Grebler

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