No Taxville: Zynga Dodges $6 Million Bill to SF

Zynga's IPO came with a tax break from San Francisco.

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    NEWSLETTERS

    Joi Ito
    Zynga CEO Mark Pincus isn't talking to his accountant about payroll taxes, as his company dodged that bill from San Francisco when the company, based in Potrero Hill, went public.

    Water your plants and grow your farm, no taxes necessary.

    Online gaming company Zynga dodged San Francisco's payroll tax when it went public in December, taking advantage of a tax exemption aimed at keeping tech companies happy to the tune of $6 million or more, according to the San Francisco Examiner.

    Zynga officials notified city leaders that the company would leave San Francisco unless it was given a tax break. San Francisco is the only city in California that levies a payroll tax on stock options, the newspaper reported.

    So the city adopted a tax break on stock options, which meant that Zynga's $510 million in employee stock compensation was not taxed at 1.5 percent. That saved the company some $7.65 million, the newspaper reported.

    Tax breaks such as these are contentious in San Francisco. Some argue that giving companies a break robs the public coffers, while proponents of business say that tax breaks keep jobs around.

    Zynga "wouldn’t have been here," without the tax break, said Supervisor Mark Farrell, himself a venture capitalist and advocate of business-friendly deals, such as the tax break that enticed Twitter to move to Mid-Market (a deal still in the works). With the tax break, Farrell added, Zynga employees are spending their windfall -- the exact size of which is not made public record -- in the local economy, plus San Francisco gets to brag that Zynga is a local company. "It’s a big deal," Farrell told the newspaper. "You can’t dismiss that."

    That's right: Farmville's locally-grown. Tell all your friends back home.