Credits tied to data centers

Democratic tax writers demand Meta explain use of research credits tied to data centers

Seven Finance Committee senators led by Ron Wyden signed a letter demanding answers from Meta CEO Mark Zuckerberg.

Brian Faler

A group of Senate Democratic tax writers said Wednesday that Meta may be abusing a popular business tax break, and are demanding more details of why the social media giant is claiming a research subsidy in conjunction with its construction of data centers.

The lawmakers wrote they want to know whether Meta, which includes Facebook and Instagram, is improperly claiming the provision, which is supposed to be reserved for research and experimental technologies, not typical business expenses. Their letter was prompted by a recent report by the New York Times that the company has cut its tax liability by billions of dollars using the credit.

“The federal research credit can be a useful and necessary tool to support our nation’s innovation economy and cutting-edge research,” the senators said in a letter to Meta CEO Mark Zuckerberg. “Subsidizing your A.I. data center build is not close to meeting this standard.”

They added: “Any efforts by Meta to use A.I. data center expansion as eligible for research credits is potentially a significant misapplication of federal tax law that merits further investigation.”

The letter was signed by Sen. Ron Wyden (D-Ore.), the ranking Democrat on the tax-writing Finance Committee, and six of his colleagues on the panel. One of the letter’s signers, Sen. Peter Welch of Vermont, separately wrote last week to IRS CEO Frank Bisignano, asking the tax agency for information on how Meta and other major tech companies are using the R&E tax credit.

It comes as data centers have emerged as a major bipartisan issue in the midterm elections amid widespread voter backlash against the facilities. Budget forecasters say tax breaks claimed by companies for the AI infrastructure buildout are now big enough to put a dent in federal tax receipts.

The tax code has long included subsidies for corporate research and development programs, which have been broadly supported by lawmakers in both parties. Republicans beefed up the provisions part of their 2025 tax cuts.

A Meta spokesperson rejected the criticism.

“Unlike traditional data centers, AI-optimized data centers are inherently new and require extensive testing and experimentation that cannot be simulated in order to get the design and build right,” the spokesperson, Andy Stone, said. “This is precisely the kind of domestic investment Congress encouraged when it established these tax incentives decades ago.”