Meta tells the IRS its AI data centres are experiments, NYT reports

Meta tells the IRS that its AI data centres are an experiment that could fail, The New York Times reported on Wednesday. That lets Meta claim a research tax credit on the AI chips it buys. The credit cut almost $4bn off its tax bill last year.

Kashmir Hill, Jesse Drucker, Eli Tan and Mike Isaac reported the story for The New York Times . They cited four people with knowledge of Meta’s operations and a review of securities filings. No outlet had reported Meta’s use of the credit for data centres before.

“Our investments in A.I. are accelerating every major part of our core business,” Mark Zuckerberg has told investors.

For tax purposes, Meta classifies its data centres as “pilot models”, according to the Times. The research and experimentation tax credit, created in 1981, gives companies a rebate for supplies used in an experiment. Standard business operations do not qualify. Meta is claiming the credit for the chips it buys from companies including Nvidia.

Meta began claiming the credit for its data centres two years ago, according to the Times. It labels chips bound for AI data centres differently from those sent to standard data centres, two people said. Some in its finance department questioned whether the approach would pass the IRS, one person said.

The credit cut Meta’s taxes by $2bn in 2024 and $3.9bn in 2025, filings show. In 2023, it was $700m. Meta is now the biggest beneficiary of the credit among publicly traded companies, the Times found. Its auditor, EY, signed off on the plan and has since pitched the approach to other companies.

Meta sets money aside for tax positions the IRS could challenge. That reserve rose 45% in two years, to $18.74bn from $12.9bn. The first factor Meta lists is uncertainty over its research tax credits. Apple, Amazon, Alphabet and Microsoft also report research credits above $1bn a year. None has flagged the credit as a risk, according to the Times.

“Meta is claiming billions of dollars in tax benefits that its own accountants are telling investors are at risk of being overturned by the I.R.S.,” said Lisa De Simone, a former EY tax adviser.

Meta declined to say what made its data centres experimental. Andy Stone, a Meta spokesman, said the company had invested $200bn in research and development over five years.

“Like other companies that invest at this scale, we use the tax incentives Congress established decades ago,” Stone said.

James Shannon sponsored the credit as a congressman in 1981. He told the Times it was meant for “people power, knowledge, information”.

“This has gone way, way beyond what anybody could have imagined,” Shannon said.

The Joint Committee on Taxation projected the credit would cost the government $32.1bn in 2025. Meta alone would account for more than a tenth of that. Meta is also fighting the IRS over $355m in savings. It had treated Zuckerberg’s 2013 stock options as a research expense.

This month, Meta released its Muse AI agent , which became the most downloaded app on iPhone and Android. On Tuesday, Meta signed a deal for AI computing capacity in Southeast Asia. The same day, Zuckerberg’s AI safety accord was signed at the White House.