The Case of the Relabelled Chips

The research tax credit Meta claims on its AI chips requires a four-part test: an experiment, not a product. The IRS has refused it for proven equipment, and a shipbuilder lost in court in 2021. The chips are known to work, and Meta's own finance staff had doubts. Meta labelled chips bound for AI data centers differently for tax purposes; its auditor EY signed off and has since pitched the idea to others. Meta says it uses incentives Congress created.

The research tax credit Meta claims on its AI chips requires a four-part test proving an experiment rather than a product rollout, and the IRS has refused it for proven, commercially available equipment, as a court did for an Indiana shipbuilder in 2021; Meta's own finance staff had doubts, lawyers it consulted warned the IRS dislikes big claims, and after months of deliberation Meta began labelling chips bound for AI data centers differently for tax purposes, with its auditor EY signing off and later pitching the idea to other companies.

Starring

Inspector HaleWrenThe LedgerNightjar