Should Americans provide subsidies through the tax code for Meta’s creation of AI data centers and compensation paid to its CEO, Mark Zuckerberg? If you think the answer is yes, then you might believe that the Trump administration is doing an excellent job enforcing tax laws and that the two major pieces of tax legislation he and Congressional Republicans have enacted have left the revenue code in really good shape.
On the other hand, if you think Meta should not be subsidized (through the tax code or in any other way) for building AI data centers and for compensating Mark Zuckerberg, then you should believe something is seriously wrong with our tax laws and how they are enforced.
Earlier this year, ITEP described how Meta paid just 3.5 percent of its profits in federal corporate income taxes in 2025 – and why its effective tax rate for the year may turn out to be even lower than that.
Today the New York Times explains part of how the company pulled that off, reporting that Meta is claiming the research tax credit — a tax break enacted decades ago to encourage innovation and experimentation — to pay for the equipment it uses in data centers to power its AI activities.
The research credit is a tax subsidy that is supposed to encourage companies to conduct research and experiment to find answers, innovations, new processes, or approaches that are not already known. It is not supposed to simply subsidize whatever equipment a tech company needs to do its business.
As the Times mentions, this is not Meta’s first R&D credit-abusing rodeo: the company is already embroiled in a longstanding dispute with the IRS over its claim that more than $4 billion in compensation paid to Mark Zuckerberg should count as eligible research expenses because he allegedly invented new features on Facebook.
When most people hear the term “research”, they might think of people in lab coats trying to cure cancer or engineers searching for a way to make a more powerful engine. We do not think of Mark Zuckerberg figuring out how to use our personal data to help other companies tempt us to buy something when we are looking at Facebook to catch up on some relative or friend who we are too lazy to call.
The research credit has long been used to subsidize things that normal people would not call “research.” Years ago, Congress had a chance to reform the credit before they made it a permanent part of the tax code and lawmakers passed up that opportunity. More recently, a study found that the research credit seems to subsidize many companies for doing things they would do anyway and encourages many to just recharacterize activities as research in order to obtain this tax break.
When you give research credits to a company that is sitting on $43 billion of cash and cash equivalents, as Meta was at the beginning of 2025, it seems especially clear that the company involved already has the means to spend whatever it wants on whatever it wants and won’t be swayed by tax incentives into changing its plans.
It is not surprising that a profit-seeking company will seek to lower its tax bill in whatever ways Congress and the IRS allow. What’s unusual about Meta is its willingness to identify the limits of what the law allows and then blow right past them. The company openly admits that over $2.6 billion of the tax breaks it claimed last year alone are “uncertain,” meaning they believe that tax authorities would likely disallow them if they were scrutinized.
The budgetary stakes for the U.S. are potentially huge: the Times’ new revelations suggest that one of the most profitable corporations in American history is attempting to use the biggest capital-spending boom in the history of the world to reduce its already-low tax rates even more.
In theory, it is up to the IRS and the Treasury Department to make it clear that equipment used in data centers is not “research.”
Given that we have more than two more years of federal agencies serving under President Trump, the one American who fervently supports building more AI data centers, the only hope is that the next Congress begins to ask questions about Meta’s outlandish tax maneuvers.
