Meta Used Zuckerberg's Pay to Cut Its Taxes by $355 Million: Could Musk Do It Too?

Source Beincrypto

Meta listed CEO Mark Zuckerberg as a researcher on its tax forms, cutting its tax bill by about $355 million. The Internal Revenue Service (IRS) says Meta got it wrong.

The same rules now apply to a far bigger payday. In June, Elon Musk exercised Tesla stock options worth about $116 billion on paper.

How Meta Turned Zuckerberg Into a Researcher

The approach relies on the research credit, a tax break that dates to the 1980s. It rewards companies for paying people to run experiments.

For 2012 and 2013, Meta counted $4.1 billion of Zuckerberg’s stock option income as research wages, Tax Court filings show. That produced about $355 million in credits.

The dispute comes down to timing. Meta says Zuckerberg was writing code when he received the options in 2005. The IRS argues the options instead paid for his work from 2008 to 2010.

Meta’s AI Data Centers Are “Experiments” on Its Tax Forms

The second approach is bigger. Meta classifies its AI data centers as “pilot models” for tax purposes, the New York Times reported. That treatment lets the company count chips as research supplies.

Zuckerberg presented a very different picture to investors in July.

“…our investments in AI are accelerating every major part of our core business,” he said.

Meanwhile, Meta stock jumped 11% in one day after Wells Fargo cited demand for Muse, the company’s AI assistant.

However, Meta’s own filing lists $18.74 billion in tax benefits as uncertain, mainly tied to research credits and overseas pricing.

Zuckerberg tax break Meta unrecognized tax benefits 2024 to 2026Meta Tax Benefits At Risk

Could Musk Do It Too?

Elon Musk exercised 303.96 million Tesla options on June 16, an SEC filing shows. At $404.66 a share, the paper gain reached about $116 billion, roughly 28 times the $4.1 billion Meta counted for Zuckerberg.

Zuckerberg tax break compared with Elon Musk Tesla option payoutZuckerberg vs Musk Options

Musk has often posted about his tax bill.

“I have paid over $10B in taxes in a single year, more than anyone in history. If I exercise and sell stock options, the combined federal and state income tax is ~45% (I still pay California taxes for every day I spend there). Then there is another 40% tax paid on my estate when I die. Overall, I will probably end up paying trillions in taxes,” he said in May.

However, Treasury rules set a high bar. Wages qualify only for employees who do research, directly supervise researchers, or directly support them. Top managers fall outside that group, and the filing lists Musk as Tesla’s CEO.

Separately, Tesla holds $1.83 billion in unused federal research credits, its annual report shows.

The Tax Court has not ruled on the Zuckerberg case. Its decision will show whether a CEO’s option payout can count as research pay.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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