Business 5 min read By Callum Montgomery
Meta Faces Senate Deadline Over Data Centre Tax Credits as Effective Rate Falls to 2%
Seven US senators have given Mark Zuckerberg until Halloween to explain how Meta classified its AI data centres as experimental to claim federal research credits, after filings showed the company's effective tax rate fell to 2% for the first nine months of 2026.
Meta has been given until the end of the month to answer questions from seven US senators about how it claimed federal research tax credits for its artificial intelligence data centres, after the company disclosed that its effective tax rate fell to 2% for the first nine months of 2026.
The senators, led by Ron Wyden of Oregon and including Elizabeth Warren of Massachusetts, Sheldon Whitehouse of Rhode Island, Catherine Cortez Masto of Nevada, Maggie Hassan of New Hampshire, Ben Ray Luján of New Mexico and Peter Welch of Vermont, wrote to Mark Zuckerberg on 13 October requesting a response by Halloween. Their letter cites public records indicating that Meta told the Internal Revenue Service its AI data centres are experimental «pilot models» qualifying for the federal research and experimentation credit.
According to the letter, Meta has said in federal regulatory filings that it used the research credit to reduce its federal income tax liability by $6.6 billion between 2023 and 2025 — $700 million in 2023, $2 billion in 2024 and nearly $4 billion in 2025. The senators wrote that while the research credit can be a useful tool to support innovation, «subsidizing your A.I. data center build is not close to meeting this standard». They asked Meta to break down how much of each year's credit went to microchips, computing equipment and other data centre materials.
The scrutiny comes as Meta's quarterly report shows how far its tax rate has fallen below the 21% statutory federal rate. Meta reported income before tax of $53.5 billion for the nine months to 30 September and a tax provision of $1.03 billion, an effective rate of 2%. Without changes to its tax position, the company expects a fourth-quarter rate of between 15% and 17%.
Most of the reduction stems from a single measure. On 18 February, the Treasury issued Notice 2026-7, providing relief from the corporate alternative minimum tax on previously capitalised US research and development costs. Meta recognised an $8.03 billion tax benefit in the first quarter as a result, partly offsetting a $15.93 billion charge booked in the third quarter of 2025 after the One Big Beautiful Bill Act became law — a quarter in which its effective rate reached 87%.
The benefit pushed Meta's first-quarter rate to negative 23%; without it, the rate would have been about 14%. On a Fortune calculation based on the filings, the nine-month tax provision would have been roughly $9.06 billion, or about 17% of pretax income, without the relief. Meta's third-quarter rate, unaffected by the benefit, was 24%, or 17% excluding a $9.89 billion charge.
Meta is defending its use of the research credit. A spokesperson said the company is one of the largest investors in research and development in the United States, investing $200 billion over the past five years, including $57 billion in the last year alone, in frontier research, new technology and American jobs. The spokesperson argued that AI-optimised data centres differ from traditional facilities and require extensive testing and experimentation that cannot be simulated, describing this as the kind of domestic investment Congress encouraged when it created the incentives decades ago.
Warren said AI companies were delivering a «one-two punch» to families by forcing Americans to subsidise their data centres through tax dollars and higher utility bills, and called for tougher action to ensure big technology companies «pay their fair share».
The filings also show the scale of tax savings that remain open to challenge. Meta's gross unrecognised tax benefits — savings claimed but not yet treated as final — stood at $20.82 billion at 30 September, up from $16.45 billion at the end of 2025. If realised in a future period, the company's tax provision would fall by $14.58 billion. Meta said the benefits were primarily accrued for uncertainties over its research tax credits and transfer pricing with foreign subsidiaries, and that it believes its accrual is adequate.
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