U.S. companies may no longer be able to enjoy the full tax benefits from stock-based employee compensations.
Stock-based compensation is a favorite mode of employee pay for many tech firms. Last year, Facebook could save $1.25 billion on taxes due to a stock-based deduction. Alphabet and Apple got tax ‘perks’ of $1.7 billion and $1.6 billion respectively thanks to the full deductions on their stock-based employee compensations. But with a new federal ruling restricting firms from fully deducting their stock-based expenses from tax calculation, Silicon Valley players could see a substantial bump in their tax liabilities.
Facebook might have to pay a tax rate of 30% in Q3 - versus the standard 21% corporate tax rate - to make up for previous periods’ deductions on stock payments. Semiconductor developer Silicon Laboratories Inc. said in a recent filing that it’s the court decision’s impact “could be material” to financial statements.