HN user
Unbelievable! Ten months have passed and the uninformed and clueless are still in denial. Let me spell it out for you - do you remember what the COVID shutdowns did to main street businesses like retail and restaurants? If this cluster-fck of tax legislation isn’t withdrawn or reformed the same fate is awaiting tech startups, generally, and software startups specifically! UNDERSTAND!!!
Unfortunately, most folks in the community seem to be hiding their heads in the sand with the hope that it was some kind of mistake or misinterpretation. Those that have been raising a red flag for months have been largely ridiculed by people on this board. As for the MSM - have you heard anything about it? Even those non-MSM forums that are supposedly "plugged into" current events that impact software startups, like the All-in Podcast, are radio silent. Which is odd considering that this tax change is at least as lethal to the community as the SVB bankruptcy that they droned on for months about. This issue? Crickets! Strange, huh?
It’s clear from the responses to your post that most of your fellow software developers are in a state of denial. I can appreciate their position. I couldn’t believe our government representatives could be this insane, either. But, apparently, they are. I wish that they were right. I’d be very happy to be wrong. But all the information out seems to suggest otherwise. Just as a small sample, this is from E&Y. No small accounting firm, they:
“The modifications made to Section 174 include a new subsection that specifically includes any amount paid or incurred in connection with software development as a research or experimental expenditure (and, therefore, within the scope of the provision). Presently, these costs may be deducted or amortized under Revenue Procedure 2000-50. Once the new Section 174 provisions take effect after 2021, Revenue Procedure 2000-50 will no longer apply to any software development costs, and they will be subject to the required amortization under Section 174. As a general rule, purchased software may be amortized over 36 months under Section 167(f)(1). This means that, under the Act, taxpayers developing software will be in a less favorable tax position than those acquiring it.”
There’s no way around it. This is an existential threat to technology companies in general and software companies specifically.
It sure is a mess. Everyone, including the legal and accounting experts, are trying to figure this out. Just goes to show you, no one can screw things up quite like our elected representatives. There is a bill being circulated to fix it (https://news.bloombergtax.com/daily-tax-report/senators-rein...), but who know when or if it will pass. Knowing them, they'll wait for the smoldering wreckage to appear before they do anything.