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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

#561

Post by anymouse123456 »

joshdavham wrote: post #495
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.

> 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. Why pretend that it doesn’t exist? Why not vocally lobby for a change in the tax code?

Because then the people we watching might notice you and dig in.

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

#562

Post by philjohn »

duped wrote: post #164
californical wrote: post #113

Earlier quoted context omitted.

It is complex - is it better for the money to go back into the economy by paying high salaries to a specific group of highly-educated people ? Or is it better for the money to go back into the economy through taxes, then disbursing the benefits to lower-income benefit programs ? I’m not sure what the answer is. The former is likely to drive some innovation, which I’m sure varies by company. Where the latter could als…

It can do both, by eliminating corporate taxes.

At that point, do we need to fundamentally rethink political donations by companies (outright ban them) and SuperPACs? No representation without taxation.

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

#563

Post by anymouse123456 »

samus wrote: post #558
joshdavham wrote: post #495

Earlier quoted context omitted.

> 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. Why pretend that it doesn’t exist? Why not vocally lobby for a change in the tax code?

There is bipartisan support to repeal the change. Meanwhile, further changes to the tax code are being prepared by the administration, very probably containing further such time-delayed footguns that will be the problem of the next administration to clean up, making them look like they raise taxes.

This change was added in 2017, triggered in 2021/2022. It's been the policy for years now.

There is very little pressure on elected officials because big cos can afford it and it bankrupts their tiny future disruptors.

Why would you let it be fixed?

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

#566

Post by bunnie »

djfivyvusn wrote: post #557
bunnie wrote: post #537

Earlier quoted context omitted.

It's pretty bad. It had a huge impact on my personally, I'm a small R&D shop and basically I have had to end all risky long-term research projects. In addition to the research costs, I'd also have to pay taxes on the research costs mostly up-front. Significantly, if the project doesn't work out, I'm still out of pocket for the tax money. It's a penalty for taking a risk, and it kneecaps American innovators in a globa…

Just pledge copyright of contributions to eff or something.

Work-for-hire open source contributions often already bear a copyright holder of the entity paying for the work. The problem isn't who is the copyright holder.

The problem is that the license assigned says that anyone is free to use the code. Anyone is a set of people that includes the contributor, which then triggers the interpretation that the research is incrementally in the contributor's benefit and thus disqualified from preferential tax treatment.

You'd need a custom license where everyone in the world could use the results except for the contributor, and then like, a source control system that hides the source files from the contributor's view of the repository.

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

#567

Post by youngtaff »

itsoktocry wrote: post #232
trhway wrote: post #222

Earlier quoted context omitted.

Yes, that is tremendously important aspect here - the US tech would look better on paper - higher paper profits due lower paper expenses - while getting increased cash flow stress due to decreased deductability of the salaries which are among the main expenses in software dev business.

> Yes, that is tremendously important aspect here - the US tech would look better on paper It's completely unimportant. Nobody is getting fooled "on paper" by amortized salaries.

Want a bet?

I’ve seen it used in UK listed companies to massage the profit numbers and make divisions of the company seem more profitable than they are

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

#568

Post by Schiendelman »

gnopgnip wrote: post #484
potamic wrote: post #22

This is insane, how does it make sense? Employee salary expenses are no different from other expenses to run your business. Imagine they did this for raw material instead, a restaurant could only expense 20% of the food that they sell. If they purchased $100 worth of food, but could only sell $50 worth of it, they have to pay tax on that even when making a net loss overall. It just does not make any sense. There woul…

It’s the same for movies, other intangible assets that are valuable and produce income over several years. And it’s done for many tangible goods, like servers in a datacenter, the kitchen equipment in a restaurant.

I think you may misunderstand. For most of those, you get the choice to amortize if you prefer. In this instance, you must amortize, which is a big problem for startups.

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

#569

Post by shigawire »

riehwvfbk wrote: post #513
Braxton1980 wrote: post #456

Earlier quoted context omitted.

What makes California's government dysfunctional? What about Detroit?

A government that runs the richest city in the country (SF trades this spot with NY every few years) and makes it look the way it does is the definition of dysfunction. And Detroit... well, I guess now that they've bulldozed all the abandoned buildings it looks less like a post apocalyptic hellscape and more just abandoned. An improvement I suppose.

You are all over this thread treating HN like reddit or twitter. Please go.

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

#570

Post by ant6n »

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…

I don’t get the big hoopla. Here in Germany I’m opting to turn development costs into assets (I simplify a bit). I need assets on the balance sheet, otherwise we’re over-indebted. As long as the development costs are much higher than income (I.e. as long as you’re not profitable), then it shouldn’t matter. And once you are profitable, you pay some more corporate taxes, but aren’t they kind of not too high in the us anyway?
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