Are there any sources for the argument why this should apply to software and not to, say, farm equipment? The cash flow and taxation story seems to be the same.
presumably it's status quo bias
Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
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Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#112For folks that don't know the background on this, here's a layperson summary: - A business is usually taxed on its profits: you deduct your revenue from the cost of producing that revenue, and the delta is what you are taxed on. - In software businesses, this usually means if you spend $1M in software development to develop a web app, and it makes $1.1M in that year, you'd get taxed on the $100K profits. - However, a…
While this does convey the idea, the premise is also biased. > even though it has a total of $100K in the bank after the actual expenses were paid. People running a business can perfectly understand the concept of liquidity. And yes, just because you transform money to something else, then it doesn't mean that you should not be taxed on it. The extreme example is a company that buys gold on the last trading day of th…
Doesn’t that just defer the tax until later?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#113Earlier quoted context omitted.
It wasn't intended to stick, it's a bad idea that was intentionally bad in order to make it easier to reverse.
I don't follow. What is the motivation of doing something intentionally bad to make it easy to reverse?
The worse it was the better it worked as a budget fudge and it could be included in projections and allow a budget neutral bill to be passed. And by being so bad it would be easier to reverse as fewer people would defend it. There was an attempt to eat their cake and have it too.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#114Interesting that YC is jumping on this tax code thing, but the shitty tax situation for employees trying to hold onto the equity they've earned is just ignored. The number one problem for startup employees is that the AMT tax makes it impossible to exercise options in a company that is doing well. YC is showing us that they will fight for changes to the tax code when it benefits their bottom line directly, but are si…
Can’t you just exercise early to avoid AMT?
Once a startup hits series A, early exercise is often $X0,000 and a lot of people cannot afford to take a speculative bet with that kind of money.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#115I wonder if something like this could also help the hardware industry, thus encouraging more manufacturing in the US.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#116This is less on that specific topic and more general: While I enjoy the hacker news forums a great deal, I've no relationship with YC as an org. I am not sure that YC has any particular interest in things that might impact me as an individual contributor in an org as much as it impacts them. Understandably there's an everyone for themselves aspect here, but that makes these kinds of call to actions a bit hollow to me…
This is something that both impacts them and impacts you if you're a developer. This tax treatment can increase the cost of a dev by 5-15% which leads to less hiring and a looser job market. Which will impact us even if we're not looking for work because most companies look at market rates when deciding raises.
Possibly, but I think if YC companies could get away with just cutting everyone they would too.
I don't doubt there's an impact here, but it's not because they have a real interest in any other topics that concern me and hiring, H1B and so on.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#117A lot of people don't know what this Section 174 is about, so here's a brief explainer. Normally, when you have expenses, you deduct them off your revenue to find your taxable profit. If you have $1 million in sales, and $900k in costs, you have $100k in profit, and the government taxes you on that profit. Section 174 says you can't do this for software engineers. If you pay a software engineer, that's not "really" a…
> Normally, when you have expenses, you deduct them off your revenue to find your taxable profit. If you have $1 million in sales, and $900k in costs, you have $100k in profit [..]
I'm not sure it's helpful to simplify quite that much, doesn't this usually depend on whether we're talking about operating expenses (typically rent, utilities, salaries, supplies) or capital expenditures (typically buildings, land, intangibles...)?
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#118A lot of people don't know what this Section 174 is about, so here's a brief explainer. Normally, when you have expenses, you deduct them off your revenue to find your taxable profit. If you have $1 million in sales, and $900k in costs, you have $100k in profit, and the government taxes you on that profit. Section 174 says you can't do this for software engineers. If you pay a software engineer, that's not "really" a…
That's nuts, since a payroll should never be considered an asset. That's trying to put a material value on software, and doing it based on the salaries of developers is as crazy as valuing it in lines of code.
The value of software could be based on something more realistic, like a percentage of actual revenue, but I suppose tech giants would be against that.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#119A lot of people don't know what this Section 174 is about, so here's a brief explainer. Normally, when you have expenses, you deduct them off your revenue to find your taxable profit. If you have $1 million in sales, and $900k in costs, you have $100k in profit, and the government taxes you on that profit. Section 174 says you can't do this for software engineers. If you pay a software engineer, that's not "really" a…
So it applies to software engineers but under what definition of software engineer?
This [1] is the only definition the code actually give.
> (3) Software development
> For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.
1. https://www.law.cornell.edu/uscode/text/26/174
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Is a test or QA engineer considered a software engineer?
Is an FPGA or ASIC engineer still considered a software engineer if they are writing in HDLs?
Is a systems engineer, electrical engineer, or mechanical engineer considered a software engineer because they use MATLAB, etc and use programming to do their design work?
Is a sysadmin, DB admin, or other IT staff considered a software engineer because they write software as part of their job?
What about a quantitative analyst, data scientist, accountant, actuary, or any of the other maths and analysis adjacent job roles that regularly use some level of programming to do their job (and therefore write software)?
What about HR, etc who use excel documents? Excel is fundamentally just a graphical array programming language (and the design of spreadsheet tools is heavily inspired directly from APL). Is anyone who uses excel or builds/maintains spreadsheets considered a software engineer?
Like software engineering is such a broad field and programming bleeds into every part of modern business at this point.
Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)
#120Luther et al, would you be willing to share some high level statistics about the submissions, such as how many signatures it gets?