Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Thousands of small businesses are struggling because of R&D amortization

twitter.com

Post reply on HN
Print view View original

51–60 of 369 posts

Re: Thousands of small businesses are struggling because of R&D amortization

#51

Post by addicted »

torstenvl wrote: post #50

[flagged]

Your comment is completely backwards. Chevron has nothing to do with this.

This was a specific law passed by Congress and the Trump administration to make their massive tax cut for billionaires revenue neutral.

The IRS is implementing the law as passed and has nothing to do with Chevron. It would be the exact same with or without Chevron because this has nothing to do with it.

It’s quite telling that the anti Chevron people have to rely on blatant falsehoods to push their agenda.

Re: Thousands of small businesses are struggling because of R&D amortization

#52

Post by djoldman »

How does one determine whether work done by an employee is classified as R&D or as an immediate expense?

If a programmer is building an app that isn't yet offered as a product, is that R&D?

If a programmer is maintaining an app that is offered as a product, is that NOT R&D?

Re: Thousands of small businesses are struggling because of R&D amortization

#53

Post by [deleted] »

addicted wrote: post #51
torstenvl wrote: post #50

[flagged]

Your comment is completely backwards. Chevron has nothing to do with this. This was a specific law passed by Congress and the Trump administration to make their massive tax cut for billionaires revenue neutral. The IRS is implementing the law as passed and has nothing to do with Chevron. It would be the exact same with or without Chevron because this has nothing to do with it. It’s quite telling that the anti Chevron…

[deleted]

Re: Thousands of small businesses are struggling because of R&D amortization

#54

Post by User23 »

kleinsch wrote: post #7

More detail with math here. Lawmakers are discussing delaying these changes for a few years and/or allowing deductions for domestic employees, but all depends on signing a budget, which is never certain. https://blog.pragmaticengineer.com/section-174/

So far as I can find the last time Congress bothered to pass a budget was 2016 with the prior one in 2010.

The government has been funding itself instead with “continuing resolutions” which pretty much just continue spending as the prior year modulo marginal changes. Incidentally this is why federal deficits have exploded since 2010: the financial crisis “one time” trillion dollar stimulus has been continued every year since.

Re: Thousands of small businesses are struggling because of R&D amortization

#55

Post by addicted »

telesilla wrote: post #39

Take action and sign up for the Small Software Business Owners Association newsletter and petitions to the government: https://ssballiance.org/ Michele Hansen is doing an incredible job here and should be recognized for it. Latest news was sent yesterday: Republicans and Democrats finally struck a tax deal that includes a partial fix for Section 174. It includes expanding the Child Tax Credit, a key Democratic priori…

They’re calling this a business priority for the Republicans when it was a Republican House, Senate and President that passed this measure.

That’s a bit too “must make it seem bipartisan” when there is a clear partisan direction.

Even when this fix is passed, it will be voted for unanimously by Democrats and only a small fraction of Republicans will vote for it.

Explain again to me how that makes it a Republican priority as opposed to a priority of the endangered species that is the Pro Business Republicans?

Re: Thousands of small businesses are struggling because of R&D amortization

#56

Post by refulgentis »

moron4hire wrote: post #46
IndoCanada wrote: post #42

Earlier quoted context omitted.

But it is difficult to fire them which is a big problem for tech companies where hiring and firing are common

I hear this a lot and it's difficult to reconcile with my experience. Every US company I've worked at (and that's always been in at-will states) has not made it easy to get rid of people. Even people with woefully bad records of losing money every year and having multiple harassment complaints filed against them were kept for nearly a decade . With one exception (I personally got fired from a tiny startup because I r…

You describe a scenario where management didn't want to fire someone - that's why it was harder. In the U.S. only two things get in the way: A) venial corruption B) worrying about unemployment insurance (that's why HR makes you do paperwork documenting an issue).

In many European countries you have to file a ton of paperwork and justify it: ex. at Google, they're still working through _January 2023_ layoffs because you have to work with the government itself and there isn't a good* financial reason for it

* by European standards. "we need stonk to go up" doesn't fly if you're massively profitable

Re: Thousands of small businesses are struggling because of R&D amortization

#57

Post by IggleSniggle »

Agathos wrote: post #29
MasterYoda900 wrote: post #5

I don’t see why software should receive special treatment when 99.99% of software engineers/developers are not in any way engaged in what might be considered genuine scientific research and development, which R&D tax advantages should be reserved for. > Changes to R&D amortization were a rude surprise to them, as they'd never had to amortize software development before, and didn't think of the work they do as R&D. Pr…

> Restaurants, bars, plumbing companies, landscaping companies, accounting firms, etc.? Do any of those businesses owe taxes before they've collected their first cent of revenue? That is the situation a software startup is now looking at.

You only get taxed on the revenue. So no, if you don't have revenue, you're not paying taxes. But all those businesses CAN deduct their expenses, and only pay taxes on profit.

Software is now in the unique position of being required to pay taxes on revenue instead of profit. If you spent $5M on development and raked in $100k, you'll be taxed on $100k (minus expenses, where the $5M must now be spread over 5 years). Of course, with those numbers, the company might want to spread costs over 5 years anyway (which they could already do).

So really, it's as if the tax code is specifically targeting bootstrapped companies that are reinvesting their profits back into the company. IMHO, the worst possible option of any that could have been chosen to milk software companies. Large established companies can afford it, VC companies were going to amortize anyway.

Yeah, you "eventually" can expense your costs. But that just means that it's a tax grab on the smaller companies that will be put out of business by this move. They pay all the tax this year, go out of business, and never get to reap the profit of the development work.

Re: Thousands of small businesses are struggling because of R&D amortization

#60

Post by jdjskiaka »

moron4hire wrote: post #41
jdjskiaka wrote: post #38

Earlier quoted context omitted.

> Some companies apparently have already been amortizing salaries for a while in anticipation of this (eg: Google) > Given that this also greatly punishes outsourcing Anyone help me understand these more? My understanding was that instead of deducting the costs of paying software devs the year it happened, it will be spread over 5 years. Which leads to a bigger tax bill now, and benefits bigger companies with deeper…

It won't push people to outsourcing, because the same code change requires 15 year amortization for foreign R&D expenditures.

Perhaps not as straight forward, outsourcing is generally lot cheaper.
Post reply on HN