Comment by cdot2
3 years ago
What would a software developer do that isn't research or development? Maybe my understanding of "research and development" is wrong. Is there a formal definition that I can go by?
3 years ago
What would a software developer do that isn't research or development? Maybe my understanding of "research and development" is wrong. Is there a formal definition that I can go by?
I still don’t understand why it has to be RnD? If I made a million dollars and spent a million in salaries, I made no profit. The government shouldn’t be taxing me on no money made. They already get taxes on the salaries I’m giving out.
Because it was a way to get the budget "balanced". They declared R&D expenses to be different from operating expenses -- if you have the money to spend on R&D then you have money to spend funding the country.
It's never supposed to be about what's "fair" or what they "should" do. It's about the fact that they want to spend $X, and need to raise $X one way or the other.
In this case, though, it was purely a trick. They were required to balance the budget over the long term, so they spent money now and identified a pot of money they could take from later. They just kicked the can down the road, and now we've arrived where the can landed. They actually don't think it's fair, or reasonable, or productive. But changing it does make somebody responsible for a huge increase in the deficit... and it's the people who spent the money 5 years ago.
There is no budget, for a long time. Only spending resolutions. And they’re not b balanced.
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That’s literally the point of this entire thread.
This change taxes you on profit you never made, and specifically targets software companies.
It’s insane.
It comes down to whether these salaries were a sheer cost and not partly an investment.
If you made a million dollar and bought a million in patents, you still would have no money but wouldn't expect to be paying 0 tax, would you ? How RnD should be taxed is up for debate, but at least the logic is that it's not a simple cost (in comparison to paying a janitor to clean the office for instance)
For many small software companies, making software is more like making a custom table rather than an actual investment.
Fair enough. If you made a million dollars and bought land with it, sure you can tax it. But something as basic as employee salaries that are a cost to any business should definitely be deductible from the profits as cost of running the business. Especially when the company is supposed to pay payroll taxes and the employees themselves pay income tax on their salaries.
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Kinda like options - you get taxed on imaginary numbers on money you don't have access to. You received zero profits but owe taxes.
What would a welder do that isn't research or development? I believe for both jobs certain tasks are journeyman-like, but others are legit R&D. I don't think software ought to be blanket-exempted because its done on a computer.
Here's the IRS' guidance on software: https://www.irs.gov/businesses/audit-guidelines-on-the-appli...
> What would a welder do that isn't research or development?
Weld stuff?
Isn't welding just "developing" metal products?
That's why you have to take into account that it's "research and development", and not "research" and "development". As in research and the development of that research, not separately research and development.
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Welding stuff is developing a product. Basically the same thing software developers do. It seems like a nonsense differentiation if those are categorized differently for taxes.
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In "research and development", that typically means "research of new ideas and methods, and developing them into commercially viable products". So are there things that software engineers do that fall under R+D? Absolutely! Is adding a sorting feature to a grid in your app one of those things? Probably not!
You should never assume legal terms mean what they colloquially mean.
Just like how "work" in physics has a precise definition which doesn't mean what it colloquially means, or "tree" in computer science.
In this case, software development of any kind is explicitly included:
> 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.
https://www.law.cornell.edu/uscode/text/26/174
What I find most confounding is that I know some folks who do what I'd call research, in that they do EDA and develop models, but since those aren't necessarily destined for development of software, their hours are not counted in this exercise. It's too, um, researchy to qualify as research, I guess? or it's just classified as fancy analytics.
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The full IRS clarification on this will helpfully be available in a few months (a few months after the deadline), but it doesn't look like things like maintenance work will qualify, only new software projects. I'm expecting that a lot of savvy companies are going to decide that a lot of software development (using the common term) is not software development in the legal sense.
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> Is adding a sorting feature to a grid in your app one of those things?
Yeah, the love the tax write-off - they don't love paying people to actually research anything.
Maintain services. Why was everyone expecting Twitter to go down after the layoffs if software developers only do research and development of new products?