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The time bomb in the tax code that's fueling mass tech layoffs

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Re: The time bomb in the tax code that's fueling mass tech layoffs

#501

Post by cma »

mountainriver wrote: post #258
demosthanos wrote: post #96

There are some misunderstandings in the comments that seem to stem from not having read the section, so I thought it was worth referencing the actual text [0]. It's quite short and easy to read. The most important bits: * Subsection (a) requires amortizing "Specified research or experimental expenditures" over 5 years (paragraph (2)) instead of deducting them (paragraph (1)) * Paragraph (c)(3) is a Special Rule that…

This is one of the worst things MAGA has done. Tech startups are the source of so much of our wealth, and this makes it very challenging to ever build one. I can’t believe this still exists, and no one has changed it. We truly are governed by morons

A dead post below says it was biden and somehow Obama, but sibling reply link says it passed into law in 2017, not 2022, the first year it went into effect I think.

Re: The time bomb in the tax code that's fueling mass tech layoffs

#502

Post by cma »

candiddevmike wrote: post #219
tomrod wrote: post #194

Earlier quoted context omitted.

They tried. They had Senate spoilers.

As a progressive, it seems like the Democrats always have Senate spoilers...

Both parties tend to when there is a narrow majority, e.g. McCain thumbs downing at the repeal of the ACA.

Re: The time bomb in the tax code that's fueling mass tech layoffs

#503

Post by gertlex »

getcrunk wrote: post #469
droopyEyelids wrote: post #346

Earlier quoted context omitted.

Who sponsored this text in the bill?

Idk but it was under trump. And the meta issue was balancing the budget after all his tax cuts so he needed to find more tax revenues. Which this accomplishes pretty handily

I think partially dismissing the question due to the bill happening "under trump" doesn't help the conversation here. If the bill was sponsored by particular reps/senators, then it's worth identifying those, so their voters can factor this bill in to their decision to vote for/against in the future, etc.

Re: The time bomb in the tax code that's fueling mass tech layoffs

#505

Post by selimthegrim »

latency-guy2 wrote: post #323
beezle wrote: post #109

Bloomstink has a short article on R&D expenses/tax credits as does Reuters on some of the back and current history. But just as an accounting note: R&D expense has nothing to do with the company having revenues for an existing product, which already is allowed to deduct cost of goods sold, selling and admin expense. It is a cost related to future business and in that regard, it is not crazy to say it should be amorti…

What is "Bloomstink"? Neither of your links references it, there are no references to the thing that makes sense when I do a web search.

Bloomberg

Re: The time bomb in the tax code that's fueling mass tech layoffs

#506

Post by arkis22 »

demosthanos wrote: post #96

There are some misunderstandings in the comments that seem to stem from not having read the section, so I thought it was worth referencing the actual text [0]. It's quite short and easy to read. The most important bits: * Subsection (a) requires amortizing "Specified research or experimental expenditures" over 5 years (paragraph (2)) instead of deducting them (paragraph (1)) * Paragraph (c)(3) is a Special Rule that…

salary is already counted as an expense right? does that mean we were double billed as two expenses? salary and R&D?

Re: The time bomb in the tax code that's fueling mass tech layoffs

#507

Post by superfrank »

anymouse123456 wrote: post #483

There is definitely a lot of misunderstanding here. This provision can and does lead companies to owe significantly more in taxes than they make. The only reason it hasn't been bigger news, is because most companies are pretending it doesn't exist and just sweeping it under the rug, hoping it will get fixed before enforcement gets serious.

I think the real reason it isn't bigger news is because the second you talk about tax code people start to tune out. It's easier to wind people up over AI taking jobs than it is to try and explain what amortization means.

Re: The time bomb in the tax code that's fueling mass tech layoffs

#508

Post by yxhuvud »

Braxton1980 wrote: post #466
yieldcrv wrote: post #270

Earlier quoted context omitted.

This bill is goated for upper middle class and tech and defense sector And I’m tired of pretending like we aren’t going to be beneficiaries Every Congress increases the debt, we can acknowledge that the cuts they picked are going to wreck the lower class especially with the medicaid, we can acknowledge that it won’t meet its goals of cuts but are you guys just scared to acknowledge its going to super charge things th…

>Every Congress increases the debt, And yet only one party campaigns on fiscal responsibility, debt concerns, and reduced spending

And funnily enough it is the other party that actually deliver improvements, while the party that campaigns on it just cut taxes when in power.

Re: The time bomb in the tax code that's fueling mass tech layoffs

#509

Post by safety1st »

hollerith wrote: post #427

My reaction to learning about this is that it is good news: this explains the weakening of demand for programmers, but unlike the AI explanation, this explanation does not come with a large risk of the demand becoming much weaker than it is now. Also, finally programmers with the right to live and work in the US catch a break: salaries for US-based programmers can be amortized over only 5 years as opposed to the 15 y…

I mean, the link not many people have made is that executives want to replace programmers with AI because of Section 174.

It has effectively become a lot more expensive and difficult to employ a programmer. Once this change went into effect we started to see hundreds of thousands of layoffs.

Then tech executives started aggressively talking up how you could use AI to write code instead of having humans write it.

Now of course reducing headcount and the associated expenses and replacing them with a bot sounds tempting to executives no matter what. But it sounds REALLY tempting when you've been on a hiring freeze since 2022 due to the fact that you can no longer deduct employee salaries in the year you pay them out.

Bear in mind that both Republicans and Democrats say they want to fix this and haven't done so due simply to gridlock and government incompetence.

I think most software businesses are taking a wait and see approach. Don't hire until this thing gets fixed. In the meantime, double down as hard as you can on automating those programmer jobs out of existence, in case the law never gets fixed.

Section 174 is the root cause.

Re: The time bomb in the tax code that's fueling mass tech layoffs

#510

Post by nlitened »

cma wrote: post #500
demosthanos wrote: post #96

There are some misunderstandings in the comments that seem to stem from not having read the section, so I thought it was worth referencing the actual text [0]. It's quite short and easy to read. The most important bits: * Subsection (a) requires amortizing "Specified research or experimental expenditures" over 5 years (paragraph (2)) instead of deducting them (paragraph (1)) * Paragraph (c)(3) is a Special Rule that…

> All software expenses must be treated as research and experimental expenses From what I've read, not for software fixes to ongoing products, but for new products and I can't remember for new feature work. Also if you contract for someone else I heard you can still write off expenses without amortization.

I would guess that because in these cases software development costs would be classified as “cost of goods sold” instead of “research and development”
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