Zynga Saves Millions on Taxes

A new tax break for stock options entices SF tech companies to stay local

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    NEWSLETTERS

    Zynga is staying in San Francisco, partially for the sweet tax break it gets.

    Zynga has landed a tax break that could be worth more than $6 million, in exchange for staying in San Francisco.

    The San Francisco Examiner reports that Zynga is expected to receive that benefit next week when it files its payroll taxes and uses the tax exemption created by the city to keep tech companies there.

    San Francisco charges a 1.5% payroll tax, that also applied to stock options, which Zynga started offering when it went public in December. Zynga executives told San Francisco city leaders they would move the company elsewhere if they didn't get a tax break.

    In an effort to keep the company in the city, the Board of Supervisors approved a reprieve from taxes on stock options.

    Zynga reported $510 million in employee stock options last year, as a result of going public. Without the tax break, the online game company would have owed the City about $7.65 million. Under the new deal, Zynga's annual bill for stock compensation will be capped at $750,000 or whatever it paid in 2010, whichever is greater.

    Zynga's not the only company that will benefit from the tax break. Yelp is reportedly going public this year, and Twitter is thought to be considering a 2013 public offering.

    The tax exemption is in effect until 2017.