Meta told the IRS its AI data centers are experimental to shave $6 billion off its tax bill

• Meta has used the experimental designation for AI data centers to save billions in tax credits
• The designation is not allowed to be used for standard business operations
• Meta has labelled its AI data centers as ‘pilot models’ allowing the company to avoid some taxes on the AI chips that outfit its facilities

Meta has been caught in some hot water with the US Internal Revenue Service (IRS) over the classification of some of its AI data centers as ‘experimental’ facilities.

This designation allows companies to claim back some tax credits on the equipment it purchases for an experiment, as it could fail and leave the company out of pocket. These tax credits are an incentive for companies to innovate and there are strict rules around claiming them for standard business operations.

According to the New York Times, Meta’s designation of some of its campuses as experimental – with the potential to ‘fail’ – allowed the company to save $4 billion on its tax bill last year through the tax credits applied to the AI chips the company purchased.

Meta data centers are ‘pilot models’

The report claims Meta has separate designations for its regular data centers that are used for cloud computing and storage services, and those used for AI. Its AI data centers are classified as ‘pilot models’, with the chips distributed to these facilities labelled differently to those sent to regular data centers.

Meta started using this tax credit two years ago, cutting its 2024 tax bill by $2 billion, and $3.9 billion in 2025 – giving the company almost $6 billion in total tax savings. The Times also found that Meta is the biggest claimant of this particular tax credit, and the company’s Auditor, EY, approved the plan and suggested other companies should also adopt this approach.

Traditionally, most companies will set aside a reserve of funds to help pay for tax positions that could be challenged by the IRS. Over the past two years Meta’s reserve has risen from $12.9 billion to $18.74 billion – an increase of 45% – and list its research tax credits as the first uncertainty that could be challenged by the IRS.

“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 is one of the largest investors in research and development in the United States,” Meta spokesperson Andy Stone said in a statement. “Like other companies that invest at this scale, we use the tax incentives Congress established decades ago to encourage this type of domestic investment.”

According to estimates by the Joint Committee on Taxation, the experimental tax credits would cost the US government $32.1 billion in 2025, with Meta’s own claims making up around 10% of that.

Meta is facing further scrutiny from the IRS over $16 billion in taxes and penalties owed on profits that the company has allegedly routed to the Cayman Islands.