Warren Wants the Receipts for Big Tech's $96B AI Tax Breaks

By Daniel Rao | October 14, 2026

Photo: The US Capitol east front in Washington, D.C., where senators are now challenging Big Tech's AI data-center tax breaks. Credit: Martin Falbisoner, CC BY-SA 3.0, via Wikimedia Commons.

For the past three years, Washington's deal with Big Tech was never written down, but everyone understood it: build the AI future as fast as you possibly can, and the tax code will help carry the cost. This week, the Senate started reading the fine print — and it does not like what it found.

In the space of seven weeks, Democratic senators have accused the industry of stretching a research tax credit to pay for concrete and cooling towers, ordered the chief executives of Meta, Amazon, Alphabet and Microsoft to disclose exactly which deductions they claimed under last year's giant tax law, and introduced bills that would strip AI data centers of their most valuable tax perks outright. It is the most coordinated assault on the economics of the AI boom that Congress has mounted — and it is aimed squarely at the buildings, not the models.

The freshest shot was fired by Senator Peter Welch of Vermont. Last week, Welch — a member of the Senate Finance Committee — wrote to IRS chief Frank Bisignano urging the agency to make sure Big Tech is not subsidising AI data-center construction with the research and experimentation (R&E) tax credit. Congress intended that credit, Welch argued, “to support private investment in nascent technologies that have uncertain commercial viability in the future.” Its reported use by the industry, he wrote, “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.”

A research credit — or a construction subsidy?

The R&E credit is one of the oldest tools in the federal tax kit: a reward for companies that spend on genuine, uncertain research. Welch's argument is blunt — pouring concrete for a hyperscale data center is not research, however many GPUs end up inside the building. The credit, he wrote, was “designed to reward new research spending and to limit the cost to taxpayers.” Turning it into a construction subsidy, in his telling, betrays both halves of that design.

“The IRS has a responsibility to ensure tax credits are being claimed as intended by Congress,” Welch wrote, in the line his office will be quoting for months.

There is a delicious irony in the addressee. The letter went to Frank Bisignano — the former Fiserv chairman and chief executive now running the IRS, a man who spent his entire career helping companies take payments, and who is now being asked to police how the biggest of them avoid making them. Welch's move, first reported by Bloomberg Tax on October 13, does not change a single line of the tax code. But it puts the IRS on notice, in writing, that Congress is watching how the credit is used — and that is how enforcement priorities are born.

Warren's letters: show us the receipts

Welch's letter is the second act of a campaign that began on September 28, when Senator Elizabeth Warren of Massachusetts led five colleagues in writing directly to the four men running the AI boom: Meta's Mark Zuckerberg, Amazon's Andy Jassy, Alphabet's Sundar Pichai and Microsoft's Satya Nadella. The signatories were Warren, Tina Smith of Minnesota, Jeff Merkley of Oregon, Elissa Slotkin of Michigan, Bernie Sanders of Vermont and Richard Blumenthal of Connecticut — a list we cross-checked against the Senate's own records, all six accounted for.

The letters asked each company to disclose exactly which deductions it claimed for AI development and data-center construction under the 2025 tax-and-spending law — the One Big Beautiful Bill Act, which restored 100% bonus depreciation and retroactive R&D expensing — and to detail the lobbying each company did before the law passed. The response deadline fell in mid-October. As of today, not one of the four chief executives has responded publicly.

Warren's framing pulls no punches. “Rather than meaningfully regulate Big Tech companies and slow down the mad rush to deploy this new technology, Republicans in Washington have passed tax subsidies for AI development and AI data centers,” she said. “These tax breaks are not free — their cost has been imposed on American families via cuts to critical social services and a higher deficit.”

The pushback arrived on schedule. White House spokesperson Kush Desai defended the policy, arguing that full equipment expensing drives “real economic growth, high-paying jobs, and big domestic investments.” A Microsoft spokesperson offered the industry's classic defence: “taxes deferred today will be paid in future years.” Deferral, not avoidance — jam tomorrow, in other words, while the data centers get built today.

The $96bn figure — what it is, and what it isn't

Warren's office has attached a number to its case: $96 billion. It is worth being precise about what that number is, because precision is exactly what this fight is about. It is not an official government score of the data-center tax breaks. It is the senators' framing of real Treasury data — and the distinction matters.

The underlying fact is this: the Congressional Budget Office reported that corporate tax receipts fell roughly 25% year-on-year over the first 11 months of fiscal 2026, an absolute decline of $96 billion — from about $390 billion to about $294 billion — with expanded expensing and bonus depreciation identified as a key driver. Warren's office then maps company-level drops into that total: Microsoft's federal tax expense fell by more than $11 billion even as its pre-tax income rose by $42.3 billion; Meta's fell from $9.6 billion to $2.8 billion; Amazon's dropped by roughly $8 billion; Alphabet's by more than $7 billion.

Presented honestly — as the senators' aggregation, not the CBO's verdict — the number still lands hard. A company can report record profits and a shrinking tax bill in the same quarter, entirely legally, because Congress wrote the law that way. Whether that is a scandal or simply the tax code working as designed is, depending on your politics, the entire argument.

Warner's bill: laying track for 2027

While Warren demands disclosure, Senator Mark Warner of Virginia is trying to change the law itself. His Data Center Tax Accountability and Disclosure Act of 2026 — Senate bill S. 5054, introduced on July 21 and referred to committee — is the most detailed attempt yet to separate AI data centers from the tax perks of the 2025 law.

Photo: Server racks at a data center in New Orleans — the physical AI infrastructure now at the centre of a Senate tax fight. Credit: Fogo Solutions, CC BY-SA 4.0, via Wikimedia Commons.

We read the text of S. 5054 on the senator's website, and the carve-out is surgical. It amends section 168(k) of the tax code to deny bonus depreciation for “any property used in an AI data center” — defined as a structure containing at least one GPU, where at least 20% of capacity is used for developing or operating AI. Facilities certified LEED Gold or Platinum keep the deduction, a green escape hatch. And large AI data-center operators would have to report their electricity and water use, emissions and backup generation every year — sunlight as policy.

Let's be blunt about its prospects: the bill has seen no committee action, and nothing this confrontational becomes law in the current Congress. Its real audience is November 3, 2026 — the midterms. Warner is pre-drafting the law a future Democratic sweep could pass in weeks rather than months. That is how Washington works now: you write the bill before you win the election.

The House piles on — and the households paying twice

The Senate does not have the field to itself. In the House, Representative Kristen McDonald Rivet of Michigan is leading the “Reverse Big Ugly Tax Breaks for Data Centers Act” — H.R. 10448, per Bloomberg Tax — alongside Representative Don Davis of North Carolina and 28 House Democrats. Introduced in mid-September, it would exclude data centers from 100% bonus depreciation and from Opportunity Zone tax benefits. “Tax cuts need to go to families, not data centers,” McDonald Rivet said in her office's release — a slogan engineered for a bumper sticker, and all the more effective for it.

Running alongside the tax fight is a second front that may matter more to voters: who pays for the power. The Ratepayer Protection Act (H.R. 9340), which would make data centers cover the cost of the new power infrastructure they require, sailed through the House Energy and Commerce Committee 52–0 in July — that rare thing, a unanimous vote on anything touching Big Tech. A companion measure, the FAIR for Data Act (H.R. 9655), would bar state-regulated private utilities from sticking data-center costs onto residential and small-business bills. The politics here are simple: nobody ever lost an election defending households against their electricity bill.

One related data point, clearly labelled as a separate investigation: an October 9 Senate report titled Power and Profits: How the AI Data Center Boom Costs Households and Communities, from Warren, Senator Chris Van Hollen and Blumenthal, found that Virginia's state sales-tax exemptions for data centers drained $1.6 billion in a single fiscal year — and that Meta's federal tax bill fell 71%. It is a different document from the letters and bills above, but it feeds the same narrative: the AI boom is being built, in part, on public money.

The through-line is hard to miss. The communities hosting these facilities are already arguing over who pays for the power and gas the data centers consume, even as grid operators warn the strain is only growing. Now the tax treatment of the buildings themselves is under fire — a sharp turn from the hands-off posture Washington has taken toward the AI industry.

Our verdict: mostly theatre — for now

Time for the honest scorecard. None of these bills will become law in the current Congress. The four chief executives sailed past the mid-October deadline without a public word. The White House is actively defending the subsidies. By any conventional measure, this is theatre — well-staged, well-timed theatre, but theatre.

And yet it would be shoddy analysis to dismiss it entirely. Disclosure demands create documents; documents create hearings; hearings create the climate in which Warner's pre-drafted bill becomes a 2027 reality if the midterms break the Democrats' way. The 52–0 committee vote on ratepayer protection shows where the bipartisan energy actually sits — not in abstract tax theory, but in voters' electricity bills. The colossally overdue question at the heart of Welch's letter — whether a credit meant for uncertain research should pay for certain concrete — is finally being asked out loud, in writing, to the man who runs the IRS.

The genuinely uncomfortable fact, for the senators, is that Congress wrote the 2025 law exactly this way on purpose — the bonus depreciation, the retroactive expensing, all of it — and is now acting surprised at the invoice. You cannot subsidise a building boom for a year and then profess shock that buildings got built. What Welch, Warren and Warner are really doing is renegotiating a deal Washington struck with Big Tech when the AI race felt existential and the costs felt theoretical. The costs are not theoretical any more. The receipts, as Warren puts it, are due.

Sources: Bloomberg Tax/BGOV; CNBC; warren.senate.gov; warner.senate.gov (S. 5054 bill text); the office of Rep. Kristen McDonald Rivet; us-brief.com; tradersunion; thetradingreport.com; taxfoundation.org; androidheadlines; crowdfundinsider.

Daniel Rao covers AI infrastructure and the politics of compute for TechPulse USA — the data centres, power deals and regulations deciding where the AI boom actually gets built.

 

The tax-break fight: questions searchers are asking

Did any CEO answer? As of October 14, no CEO had answered the substance. Per CNBC reporting relayed in early October, Microsoft declined to comment, and Amazon, Alphabet and Meta had not publicly responded. The senators' response deadline was October 12. Silence is the scoreboard so far.

Where does the $96B come from? From two parts, and they must not be collapsed. The Congressional Budget Office reported that corporate tax receipts fell roughly 25% year on year over the first 11 months of fiscal 2026 — an absolute decline of $96B. The senators map company-level drops in Big Tech tax payments into that total. It is not a CBO finding that AI breaks cost $96B, and it is not a number the senators invented. It is a CBO total with a senators' attribution laid over it.

What is Meta accused of doing with the R&E credit? Per New York Times reporting, Meta describes its AI data centres as "experimental models" and its AI chips as "experimental supplies" under the 1981 research-and-experimentation credit. BPM partner Andre Shevchuck called that reading "kind of wild and out there". Meta's own SEC filings acknowledge that uncertainties with its research tax credits mean the IRS might overturn them.

What did the companies say about electricity costs? On electricity, unlike on taxes, the companies did answer. Google said it pays "for 100 percent of the electricity we use to power our data centers". Microsoft said it is committed to paying "for the electricity that we consume". The Data Center Coalition said its members are "committed to paying our full cost of service for electricity". The senators' reply: those pledges cover only directly-serving infrastructure, while broader grid upgrades flow through to all ratepayers. (Quotes via TechTimes, October 13.)

What happens next? Three tracks to watch. Senator Van Hollen has a new data-centre bill requiring facilities to cover the full cost of the energy infrastructure they require. Senator Warner's S. 5054 has seen no committee action, and its current-Congress prospects are nil — its real audience is post-midterms. And California's SB 57, signed in October 2025, requires a state report on cost-shifting to reach the legislature by January 1, 2027.

Update, Oct. 14: the companies answer on electricity, not on taxes

Since publication, the pattern of this fight has clarified: on electricity costs, the industry talks; on tax breaks, it does not. Google, Microsoft and the Data Center Coalition have all now said, in near-identical terms, that they pay for the electricity their data centres consume — Google "for 100 percent of the electricity we use to power our data centers", Microsoft "for the electricity that we consume", the Coalition "our full cost of service for electricity". The senators' answer is that those pledges cover only directly-serving infrastructure, and that the broader grid upgrades AI demand still flow through to all ratepayers. On the tax letter itself, the scoreboard is unchanged: Microsoft declined to comment, and Amazon, Alphabet and Meta had not publicly responded by the October 12 deadline. Two legislative markers have been added to the calendar: Van Hollen's bill making data centres cover the full cost of the energy infrastructure they require, and California's SB 57 report on cost-shifting, due to the legislature by January 1, 2027. (Electricity quotes and legislative items via TechTimes, October 13; CEO-response status via CNBC reporting.)