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It is a subsidy!

Why should money spent on software _development_ not have to be deprecated over time like other money spent on _development_?

I get that it sucks from a cash flow standpoint but the same is going to be true of other R&D expenses. It's just that we're more exposed to this specific R&D expenditure and not others.



The root of this subthread makes it clear why the current provisions to force software expenses to be amortized are different than other kinds of R&D.


The article makes it clear it's a subsidy.

> Originally enacted in 1954, Sec. 174 has historically allowed taxpayers to deduct SRE expenditures in the year incurred. Its original aim was to level the playing field for small businesses, those without dedicated research teams, that may be unable to deduct product development expenses under Sec. 162 because the costs were not ordinary and necessary expenses paid or incurred in carrying on a trade or business

Straight-up, any deviation in the tax code for a special group is always a subsidy.


Just to be clear, "special group" here means "any small business that wants to do any R&D of any kind", right? Because software was not a special group before, all R&D was opt-in for this kind of accounting.

Now, after this change, software is a special group singled out, a deviation in the tax code specially carved out for us to make our field specifically the exceptional one with no wiggle room. No other type of development is named in Section 174 to explicitly require companies to amortize.

So who is that subsidizing now?


> So who is that subsidizing now?

Uh sure, with this change software would subsidize other R&D. Prior to the change anybody not eligible for Section 174 was subsidizing Section 174 recipients.

Subsidizing R&D is probably a good idea but let's call a spade a spade here. Additionally, subsidizing small business is good policy because they're by the numbers job creators while large businesses are job destroyers.


I mean, yes, it will be true for other R&D types. But that's also new and also broken for the same reason: it means new R&D companies are at a massive disadvantage in their first few years compared to the established players who have lots of expenses queued up to deduct. It's wealth redistribution from young startups to established players who have 5 years of past expenses to use in their favor, and that is going to be a very bad thing for the health and vibrancy of our economy.

And, as a sibling points out (and as I pointed out in a comment at the top level), software is in this regime singled out from all other possible R&D expenses, making it particularly vulnerable. A skilled accountant/lawyer can probably turn big chunks of other R&D expenses into something that doesn't fall under 174. No amount of skill can do that for software, because we're singled out.


Because you slinging a React component or Vibecoding a security pile requires no Technology Readiness Level assessment nor does it have development liability. Rather, what we call Software Development is more appropriately labeled Software Engineering.




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