2022–2024 (old tax rule created BIG DTA). Tax law forced: R&D must be amortized over 5 years. But accounting expenses immediately. So Book expense > Tax deduction, Meta paid more tax, meaning IRS owes them future deductions. Accounting says: record Deferred Tax Asset (DTA), so Meta accumulated tens of billions of DTA, mostly from R&D timing differences, stock-based comp, credits. Basically, this means Meta prepaid taxes, which leads to future tax coupons.
Now 2025 new law (OBBBA), Government changed rules again. Good news: R&D can be deducted immediately, which means lower cash taxes. But the problem is 15% minimum tax (CAMT). You must pay at least 15% of book income even if you have deductions. So even with tax coupons (DTA), Meta can't reduce taxes below 15%. This breaks the old assumption. Previously, Meta thought it can use all these DTA someday, now some portion can never be used because minimum tax floor blocks them, so those tax coupons are partly worthless. So Meta had to effectively write off $15.9B. Pure accounting. No money moved.
Why stock dropped? Not because of the charge itself. Because investors realized Meta's long-term effective tax rate will be structurally higher (can't drop below 15%). So future free cash flow slightly lower, valuation adjusted. It's that simple.
