Comment by ElevenLathe

What about software written on contract? It's my understanding that a signed contract with a customer to deliver something for $x is usually enough to convince a bank to lend you $x for approximately the length of time until you get paid. IOW if I'm an engineering firm that has a contract with the DOT to design a highway interchange, I can go down to the bank and a get a loan to pay my engineers' salary until we deliver and get paid. Can I do the same as a software shop that has a contract to rewrite the DOT's payroll software? I guess this scenario is still different because I'm (probably) not paying the loan off over several years -- it's more like an inventory loan.

In any case, it seems like the result of these changes (if they stand) will probably be to change in some way the amount /and type/ of software that gets written. If the tax treatment of software essentially requires it to be a capital asset, we will probably see people write more software that behaves like a capital asset: shrinkwrapped software rather than SaaS. This may not be a bad thing.