Kashmir Hill, Jesse Drucker, Eli Tan & Mike Isaac (New York Times): How Meta Uses A.I. Data Centers to Avoid Billions in Federal Taxes

Mark Zuckerberg says Meta’s A.I. push is a tremendous success. “Our investments in A.I. are accelerating every major part of our core business,” he has told investors. “Every sign that we’re seeing in our own work and across the industry gives us confidence in this investment.”

But when Meta files its taxes, it tells the Internal Revenue Service a different story. It claims that its A.I. data centers are a giant experiment that could fail, according to four people with knowledge of the company’s operations.

It does this so it can tap into a tax credit intended for research and experimentation. It’s an aggressive interpretation of the tax break, which Meta embraced to claim billions of dollars in tax credits for data center expansion.

Here’s what Meta is doing: For tax purposes, the company classifies its enormous, multibillion-dollar data centers as “pilot models.” Under a tax credit created in the 1980s to spur innovation, companies can get a rebate for supplies, but only if they are being tested in an experimental effort, not standard business operations. Meta is claiming that the costly A.I. computer chips it buys from companies, including Nvidia, are entitled to a taxpayer-provided discount as part of the experiment.

Related Coverage:

Michael Rapoport (Bloomberg Law): Data-Center Spenders Save Billions From Depreciation Tax Break

Microsoft has saved as much as $12 billion in taxes on its data-center spending from the “bonus depreciation” tax break, according to figures in the company’s annual report, though that amount likely includes benefits other than bonus depreciation as well. The tax break — enacted in 2017 and enhanced and made permanent in last year’s tax law — is aimed at spurring investment and growth by letting companies deduct much of their capital spending immediately, rather than stretching out deductions for years.

Previous TaxProf Coverage:

• Is the AI Boom Hollowing Out Corporate Tax Receipts? (Sept. 19, 2026)
• Politico: Trump Calls for Hollywood Tax Incentive (Sept. 5, 2026)
• TaxProf Blog Op-Ed: Avi-Yonah on “Should the Government Control the Major AI Firms?” (Aug. 19, 2026)
• Iselin & Nunn: How Potential AI Futures Would Play Out in the Current Tax System (Aug. 8, 2026)
• Big Tech AI Spree Revives Accounting Devices That Toppled Enron (July 27, 2026)
• Batchelder: When Money’s Time Isn’t Always Valued (July 15, 2026)
• Dynan, Elmendorf, and Sheiner on AI and Fiscal Policy (July 14, 2026)
• Virginia Rewrites the Tax Bargain for AI Data Centers (July 11, 2026)
• Faivre & Cen: Taxing Artificial Intelligence (July 11, 2026)
• States Seek to End Data Center Tax Breaks (Jan. 19, 2026)
• Data Center Development to Impact Income Tax Bases (Nov. 24, 2025)
• Eyal & Arbel: Tax Levers for a Safer AI Future (May 1, 2025)
• Tax Policy And Investment In A Global Economy (Dec. 13, 2023)