Meta Classifies Data Centers as Experimental to Avoid Billions in Taxes

Meta's massive data centers are being classified as experimental by the company, allowing it to write off billions in expenses immediately rather than over several years. This move is thanks to a new US tax law called the One Big Beautiful Bill Act (OBBBA), which reinstated immediate expensing for domestic research and experimental expenditures.

The OBBBA allowed companies to deduct qualifying expenses in the year they're incurred, reversing a previous change that required amortization of these costs over five years for domestic expenses. Meta took advantage of this by classifying its $50 billion Hyperion data center project as an experiment, which reduced its federal tax expense from $9.6 billion in 2024 to $2.8 billion in 2025.

The Union of Concerned Scientists has raised concerns that if the data centers are genuinely at risk of failure or obsolescence, local utility customers could bear the costs of stranded assets. Senator Elizabeth Warren and other lawmakers have also sent letters to Meta questioning its use of R&E deductions for its data center investments.

META is already embroiled in a significant tax dispute with the IRS over its international tax structures and transfer pricing, particularly around intellectual property and foreign earnings. The company's stock price may be affected by this dual-edged situation, where tax savings add billions to the bottom line but also rely on a legal interpretation that hasn't been tested in court.