Congressional Democrats introduced a bill this week that would block AI companies from claiming accelerated depreciation tax breaks for data center construction - subsidies embedded in President Trump's 2025 tax law that have already helped Microsoft slash its effective federal tax rate to just 2.4 percent on $100 billion in U.S. profits.
The legislation targets two provisions of the "One Big Beautiful Bill Act" (OBBBA): expensing, which lets companies write off equipment costs far faster than the assets actually wear out, and Opportunity Zone tax breaks. Both would be off-limits for data center projects under the proposed rules.
The scale of the tax avoidance
A recent Institute on Taxation and Economic Policy analysis found that Microsoft alone reaped $18 billion in federal tax breaks last year compared to what it would have paid at the full 21 percent corporate rate. Depreciation tax breaks that reward capital spending accounted for two-thirds of that total.
Microsoft is the most dramatic case, but the pattern holds across Big Tech. Amazon, Alphabet, Meta, Microsoft, and Oracle collectively reported $422 billion in profits last year while paying an effective federal income tax rate of just 4.5 percent. Their combined tax breaks reached $70 billion, with $27 billion coming from accelerated depreciation provisions.
Investment surge without any need for incentives
One recent paper estimated these five companies spent $380 billion on capital investments in 2025 and are on track to double that to $755 billion in 2026. Tech leaders themselves have described demand for data center capacity as "insatiable," which undercuts any argument that tax incentives are necessary to spur construction. The breaks function as a windfall for companies building infrastructure they would finance regardless.
The bill could also be modified to strip away research-related tax breaks that these same companies use heavily. The 2025 law restored a pre-2022 provision allowing immediate deduction of domestic research expenses in the year they occur, even though those expenses generate income over much longer periods.
Public opinion runs counter to the subsidies
Polling shows Americans dislike data centers, distrust AI, and are concerned about the economic and environmental effects the technology may bring. Few investments look less in need of government encouragement than the hundreds of billions of dollars the largest tech companies are already racing to spend on AI infrastructure.
Why this matters for IT and development professionals
If the bill gains traction, the economics of data center construction shift. Companies may slow expansion plans that currently assume heavy federal subsidization, which could affect cloud pricing, GPU availability, and compute capacity that development teams depend on. The tax breaks have effectively functioned as an indirect subsidy for the infrastructure running everything from model training to CI/CD pipelines. Any change to that financial structure will eventually show up in service costs and capacity planning decisions.
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