Welch: “The IRS has a responsibility to ensure tax credits are being claimed as intended by Congress.”
WASHINGTON, D.C. — U.S. Senator Peter Welch (D-Vt.), Member of the Senate Finance Committee and the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, this week urged the U.S. Internal Revenue Service (IRS) to ensure that Big Tech companies are not using the research and experimentation (R&E) tax credit to subsidize the construction of Artificial Intelligence (AI) data centers. In his letter to IRS CEO Frank Bisignano, Senator Welch raised concerns that Big Tech companies are abusing the R&E tax credit at the expense of the American people.
“Congress’ intent in establishing the R&E credit was to support private investment in nascent
technologies that have uncertain commercial viability in the future. Congress structured the R&E credit to be incremental, designed to reward new research spending and to limit the cost to taxpayers. Instead, its reported use by major technology companies raises concerns that the credit is being used not to support new research, but to subsidize the physical infrastructure needed to build AI data centers,” wrote Senator Welch.
According to recent public reports, Meta used the R&E credit to cut its federal tax bill by nearly $4 billion in 2025 alone. Meta reportedly claimed this credit on thousands of acres of data center development to train and further develop its network of computer chips—a process that is now widespread across the technology industry and tied to some of the most profitable businesses in the world. Meta itself acknowledged the potential for IRS to deny the R&E credit, disclosing in last year’s annual report billions in “unrecognized tax benefits” that could become additional tax liability if challenged by the IRS. Meta is not alone in this practice, as other major technology companies have similarly used the R&E credit in connection with the development of AI infrastructure and data centers.
“In 2025, Meta paid an effective federal income tax rate of just 3.5%—roughly one-sixth of the 21% statutory corporate rate. That same year, the company earned a record $79 billion in U.S. income,” the Senator continued. “Meanwhile, Americans are bearing the direct costs of rapid data center expansion, including rising electricity bills and added strain on local infrastructure. This summer, our national debt surpassed $40 trillion. The most recent IRS tax gap estimate puts the gross shortfall at $700 billion for tax year 2022, while the next update has yet to be released.”
Senator Welch concluded: “The IRS has a responsibility to ensure tax credits are being claimed as intended by Congress. Holding large technology companies accountable to their tax obligations is a straightforward step toward ensuring that every company pays its fair share.”
Senator Welch requested answers to the following questions by October 26, 2026:
- Please provide a list of companies that claimed the R&E tax credit for expenses related to AI data centers in filing years 2020 to 2025.
- What was the value of each tax credit issued in filing years 2020 to 2025 broken down by the company that claimed each?
- On average, how many full-time equivalent (FTE) IRS employees are dedicated to reviewing and examining R&E tax credit claims annually?
- How many enforcement actions did the IRS initiate related to the R&E tax credit for filing years 2020 to 2025?
- Will the IRS pursue updated guidance or rulemaking to ensure that the R&E credit is used only for its intended purpose?
Read and download Senator Welch’s full letter to IRS CEO Bisignano.
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