Meta faces IRS scrutiny over $6 billion in AI data center tax credits

Meta is under investigation by the US Internal Revenue Service (IRS) regarding its classification of AI data centers as 'experimental' facilities. By labeling these centers as pilot models, Meta has claimed significant research tax credits, resulting in approximately $6 billion in savings over the past two years. While the company maintains that these incentives are standard for domestic investment, critics and tax experts argue that the designation is being misused for standard business operations. Meta’s auditor, EY, reportedly supported the strategy, yet the company has increased its tax reserves by 45% to $18.74 billion, acknowledging the risk that these claims could be overturned. The Joint Committee on Taxation estimates that Meta’s claims account for roughly 10% of the total $32.1 billion in experimental tax credits expected in 2025. Meta is also facing separate scrutiny regarding $16 billion in potential taxes related to profits routed through the Cayman Islands.