5 ms·

I believe Amazon classifies all costs of software engineering under R&D.

by dekhn 3y ago

dilyevsky 3y ago
Section 174 is about to change that…
- xvector 3y ago
  Section 174 is a harebrained law aimed solely at "punishing" successful engineering companies. It is a Trump-era law designed to appease voters mad at what they view as successful big tech "intelligentsia." It will destroy startup culture. I can't wait until we automate the people cheered this law on, out of a job.
  - lnxg33k1 3y ago
    As a software developer I also salute that law, As italian I always voted against governments who wanted to detax r&d, if its done and funded by governments for the collectivity, then it benefits everyone, but if a private company is going to r&d for the benefits of their shareholders, then they can also pay their fair share of taxes instead of leeching from the collectivity I always felt, from outside, that anti trumpers just are against everything he does with simplistic explanation, its a good law amazon has enough money to pay their own r&d
    - xvector 3y ago
      > if a private company is going to r&d for the benefits of their shareholders What if the R&D is open-sourced? Or what if the R&D would be for a product genuinely beneficial to people? Think a new drug, or infrastructure like Google Maps, etc.
      - iancmceachern 3y ago
        The people who make a living doing the work need to be paid somehow.
      - lnxg33k1 3y ago
        Those are good points imho, I think If they make a profit with it, then they can also pay for it, its useful for society and society appreciate it with the money they give to it, no reason to pay for it with taxes
        Murskautuminen 3y ago
        Some products also only make money after a long time of R&D. If you are a startup focused on such a product, R&D tax benefits are critical to keep you alive during your long development time that will require multiple rounds of investment before you can even think of making a profit. For example, a new drug can take 10~16 years to get to the market, and this is intended by government regulations (there is often no way around it). One has to show the drug is safe and works against the intended disease, before one can sell a drug. However, before you can even start this clinical work in humans, you must discover the drug first and optimize it through laboratory and animal testing. Only after that can you enter the clinical stage to test it in humans. Clinical stages are typically divided into phase 1/2/3 and each stage requires more time and money. After you complete all that, you can finally ask for approval to sell your drug at a profit from the government (US Food and Drug Administration (FDA)/ EU European medicine agency (EMA)). This trajectory can typically be divided as follows: Drug Discovery (early lab testing) 2-4 years, $2-15M Preclinical Drug Development (advanced lab/animal testing) 2~3 years, $10-15M Clinical Stage 1 (First in human studies) 1~2 years $15~30M Clinical Stage 2 (medium-sized human study), 2~3 years, $40~60M Clinical Stage 3 (large, longer term human study), 2~4 years $100~300M. Total: 9~16 years of research & development with a cost of $167~420M. Then finally you can sell the drug for a profit. If you are a startup focused solely on such development, you have no way (or very limited ways) to make money/profit in those 9-16 R&D years. In such a case, R&D tax benefits are really useful.
    - paulryanrogers 3y ago
      > I always felt, from outside, that anti trumpers just are against everything he does with simplistic explanation Sounds like quite a broad brush. As a former Trump voter (to my shame), I realized he's a broken clock that can be right once in a while; yet still such a profoundly net negative that I'd rather he be in jail than in office. In particular I'm most against his record of sexual assault, association with predators, peeping at young pageant participants, boasting about such things, bending the law and policy to benefit his friends, praise for despots, his demand for loyalty over talent, and racist commentary.
      - lnxg33k1 3y ago
        I realised after writing it that my thought was a bit out of touch, in Italy I had my Trump, in Berlusconi, and I hated everything he said, even if something made sense
    - PaulDavisThe1st 3y ago
      Section 174 has nothing to do with "detaxing R&D". The US tax code already requires that self-classified R&D expenditures be treated as capital-expenditures, and subject to a 5-15 year depreciation period. Section 174 requires that any and all software development costs be treated as R&D expenditures, and thus capitalized/amortized. The total tax paid at the end of the depreciation period will be the same, but the upfront tax in the first year of a given expenditure is now 5-15x higher (depending on where the work was done).
  - kmeisthax 3y ago
    > I can't wait until we automate the people cheered this law on, out of a job. If your goal was "foment another wave of far-right nationalism in America", this is a good idea. Judging by the rest of your post, however, I don't think that's what you had in mind.
ainiriand 3y ago
Exactly, I worked at a big 4 in Ireland and that is what they do here.
ars 3y ago
Operations should not be R&D, but everything else certainly is. Why wouldn't it be?
- ozim 3y ago
  Because you don’t want to give tax breaks for another todo app and another off the mill CRUD that nowadays can be generated by GPT or could be copied from a template and adjusted. Using a template and adjusting or generating with GPT already sounds more like operations. You want to give tax breaks for real research and development of new things.
  - kube-system 3y ago
    There's no effective way to gatekeep that within the tax code. Tax regulators aren't experts in any research field, let alone all of them.
  - everforward 3y ago
    The market seems like it would preclude that. If they're making "another todo app" with nothing novel then the market will reject it, they will have no income, and they never would have been taxed anyways. The thought of research tax breaks is that the market qualifies them as useful. Useless inventions make no money, and have no income to be taxed anyways.
    - analognoise 3y ago
      Markets aren’t efficient like that though. In theory they’re supposed to be, but we’ve had wave after wave of “innovation” that’s the same shit with different paint. Take a car, replace all the perfectly good knobs with touch screens you won’t be able to replace in 5 years. Innovation! Massive conglomerates control the internet and feed you expertly tuned rage engagement. Innovation! Smart home lights that stop working when the servers go offline. Innovation! On and on. If the markets were rational and efficient NFTs wouldn’t have even started. Crypto wouldn’t be a thing. Printers that refuse to print black because you’re out of cyan wouldn’t exist. Markets blow and aren’t really maximizing productive anything directly. Tangentially, occasionally, when they’re not causing cost savings that cause doors to blow off of planes to save money. Seems tenuous at best.
LeoPanthera 3y ago
That seems reasonable. The D does stand for Development.
- rthkljlkrj 3y ago
  Not sure. The D in R&D stands for, I imagine, development of the business, whereas the one in software development stands for development of software.
  - kube-system 3y ago
    > Research and development is the set of innovative activities undertaken by corporations or governments in developing new services or products, and improving existing ones. https://en.wikipedia.org/wiki/Research_and_development https://en.wikipedia.org/wiki/Research_and_development
    - cj 3y ago
      IRS definition is probably more relevant: https://www.irs.gov/pub/irs-regs/research_credit_basic_sec41.pdf https://www.irs.gov/pub/irs-regs/research_credit_basic_sec41... (Not 100% sure this is the most up to date definition but it gives you an idea)
      - eru 3y ago
        Perhaps more relevant for Amazon, but not for France?
        cj 3y ago
        I’m responding to how Amazon categorizes their R&D expenditures (which is based on IRS’s definition, not the Wikipedia definition). If we don’t understand how Amazon categorizes R&D, we can’t make a fair comparison to France. If anything, IRS’s (very) broad definition of R&D helps France in that Amazon’s R&D spend isn’t truly R&D in the colloquial sense (or the Wikipedia definition) In other words, Amazon’s R&D spend is likely overstated (based on what an average person would consider “R&D”)
p1esk 3y ago
It also includes the cost of Amazon Prime video content. I don’t know why he called it R&D.
marcus_holmes 3y ago
In Australia we have a tax break that means 80% of all R&D costs are repaid by the government. Everything we can ever possibly classify as R&D is classified as R&D. If I take a dump on company time it's R&D because I'm a software dev and therefore thinking about developing stuff while I'm in there.
- mkj 3y ago
  That's not actually allowed, it's meant to be research with an "unknown outcome" or some similar wording. But lots of companies ignore yhat and claim regardless.
  - marcus_holmes 3y ago
    Yeah, playing with the wording for the claim is always fun :) How the huge mining companies get away with claiming so much is beyond me. But they do.
  - roenxi 3y ago
    Interpreting that is my least favourite part of the R&D tax incentive - as far as I'm concerned practically everything has an unknown outcome. I can't figure out what we're doing in software and sometimes that even stretches to include after a product has been built. Most ideas have been had before in some form or another - it is just nobody at this company knows about it. But genuine R&D would look very similar. There isn't a good test to distinguish "I don't know how to do this thing" from "nobody knows how to do this thing". I don't have the time, resources or inclination to know what everyone else knows. And then having to second guess what the tax office thinks everyone knows, because I know they'd accept some of the things I'm doing as research. It just isn't clear where they think the line is.
- orbisvicis 3y ago
  Wait so if I'm a software dev in Australia whose hours are classified as R&D, and my employer pays a 20% tax rate, can I file my withholdings reduced by 80% too?
  - 3y ago
saratogacx 3y ago
When I worked there I had to fill in the forms for my team (Internal tools development). R&D was for all new feature development, time spent working on tickets/support/etc. were all non-R&D. Typically a 6:1 ratio R&D:not.

I believe Amazon classifies all costs of software engineering under R&D.

by dekhn 3y ago

I believe Amazon classifies all costs of software engineering under R&D.

dilyevsky 3y ago

Section 174 is about to change that…

xvector 3y ago
Section 174 is a harebrained law aimed solely at "punishing" successful engineering companies. It is a Trump-era law designed to appease voters mad at what they view as successful big tech "intelligentsia." It will destroy startup culture. I can't wait until we automate the people cheered this law on, out of a job.
- lnxg33k1 3y ago
  As a software developer I also salute that law, As italian I always voted against governments who wanted to detax r&d, if its done and funded by governments for the collectivity, then it benefits everyone, but if a private company is going to r&d for the benefits of their shareholders, then they can also pay their fair share of taxes instead of leeching from the collectivity I always felt, from outside, that anti trumpers just are against everything he does with simplistic explanation, its a good law amazon has enough money to pay their own r&d
  - xvector 3y ago
    > if a private company is going to r&d for the benefits of their shareholders What if the R&D is open-sourced? Or what if the R&D would be for a product genuinely beneficial to people? Think a new drug, or infrastructure like Google Maps, etc.
    - iancmceachern 3y ago
      The people who make a living doing the work need to be paid somehow.
    - lnxg33k1 3y ago
      Those are good points imho, I think If they make a profit with it, then they can also pay for it, its useful for society and society appreciate it with the money they give to it, no reason to pay for it with taxes
      - Murskautuminen 3y ago
        Some products also only make money after a long time of R&D. If you are a startup focused on such a product, R&D tax benefits are critical to keep you alive during your long development time that will require multiple rounds of investment before you can even think of making a profit. For example, a new drug can take 10~16 years to get to the market, and this is intended by government regulations (there is often no way around it). One has to show the drug is safe and works against the intended disease, before one can sell a drug. However, before you can even start this clinical work in humans, you must discover the drug first and optimize it through laboratory and animal testing. Only after that can you enter the clinical stage to test it in humans. Clinical stages are typically divided into phase 1/2/3 and each stage requires more time and money. After you complete all that, you can finally ask for approval to sell your drug at a profit from the government (US Food and Drug Administration (FDA)/ EU European medicine agency (EMA)). This trajectory can typically be divided as follows: Drug Discovery (early lab testing) 2-4 years, $2-15M Preclinical Drug Development (advanced lab/animal testing) 2~3 years, $10-15M Clinical Stage 1 (First in human studies) 1~2 years $15~30M Clinical Stage 2 (medium-sized human study), 2~3 years, $40~60M Clinical Stage 3 (large, longer term human study), 2~4 years $100~300M. Total: 9~16 years of research & development with a cost of $167~420M. Then finally you can sell the drug for a profit. If you are a startup focused solely on such development, you have no way (or very limited ways) to make money/profit in those 9-16 R&D years. In such a case, R&D tax benefits are really useful.
  - paulryanrogers 3y ago
    > I always felt, from outside, that anti trumpers just are against everything he does with simplistic explanation Sounds like quite a broad brush. As a former Trump voter (to my shame), I realized he's a broken clock that can be right once in a while; yet still such a profoundly net negative that I'd rather he be in jail than in office. In particular I'm most against his record of sexual assault, association with predators, peeping at young pageant participants, boasting about such things, bending the law and policy to benefit his friends, praise for despots, his demand for loyalty over talent, and racist commentary.
    - lnxg33k1 3y ago
      I realised after writing it that my thought was a bit out of touch, in Italy I had my Trump, in Berlusconi, and I hated everything he said, even if something made sense
  - PaulDavisThe1st 3y ago
    Section 174 has nothing to do with "detaxing R&D". The US tax code already requires that self-classified R&D expenditures be treated as capital-expenditures, and subject to a 5-15 year depreciation period. Section 174 requires that any and all software development costs be treated as R&D expenditures, and thus capitalized/amortized. The total tax paid at the end of the depreciation period will be the same, but the upfront tax in the first year of a given expenditure is now 5-15x higher (depending on where the work was done).
- kmeisthax 3y ago
  > I can't wait until we automate the people cheered this law on, out of a job. If your goal was "foment another wave of far-right nationalism in America", this is a good idea. Judging by the rest of your post, however, I don't think that's what you had in mind.

ainiriand 3y ago

Exactly, I worked at a big 4 in Ireland and that is what they do here.

ars 3y ago

Operations should not be R&D, but everything else certainly is. Why wouldn't it be?

ozim 3y ago
Because you don’t want to give tax breaks for another todo app and another off the mill CRUD that nowadays can be generated by GPT or could be copied from a template and adjusted. Using a template and adjusting or generating with GPT already sounds more like operations. You want to give tax breaks for real research and development of new things.
- kube-system 3y ago
  There's no effective way to gatekeep that within the tax code. Tax regulators aren't experts in any research field, let alone all of them.
- everforward 3y ago
  The market seems like it would preclude that. If they're making "another todo app" with nothing novel then the market will reject it, they will have no income, and they never would have been taxed anyways. The thought of research tax breaks is that the market qualifies them as useful. Useless inventions make no money, and have no income to be taxed anyways.
  - analognoise 3y ago
    Markets aren’t efficient like that though. In theory they’re supposed to be, but we’ve had wave after wave of “innovation” that’s the same shit with different paint. Take a car, replace all the perfectly good knobs with touch screens you won’t be able to replace in 5 years. Innovation! Massive conglomerates control the internet and feed you expertly tuned rage engagement. Innovation! Smart home lights that stop working when the servers go offline. Innovation! On and on. If the markets were rational and efficient NFTs wouldn’t have even started. Crypto wouldn’t be a thing. Printers that refuse to print black because you’re out of cyan wouldn’t exist. Markets blow and aren’t really maximizing productive anything directly. Tangentially, occasionally, when they’re not causing cost savings that cause doors to blow off of planes to save money. Seems tenuous at best.

LeoPanthera 3y ago

That seems reasonable. The D does stand for Development.

rthkljlkrj 3y ago
Not sure. The D in R&D stands for, I imagine, development of the business, whereas the one in software development stands for development of software.
- kube-system 3y ago
  > Research and development is the set of innovative activities undertaken by corporations or governments in developing new services or products, and improving existing ones. https://en.wikipedia.org/wiki/Research_and_development https://en.wikipedia.org/wiki/Research_and_development
  - cj 3y ago
    IRS definition is probably more relevant: https://www.irs.gov/pub/irs-regs/research_credit_basic_sec41.pdf https://www.irs.gov/pub/irs-regs/research_credit_basic_sec41... (Not 100% sure this is the most up to date definition but it gives you an idea)
    - eru 3y ago
      Perhaps more relevant for Amazon, but not for France?
      - cj 3y ago
        I’m responding to how Amazon categorizes their R&D expenditures (which is based on IRS’s definition, not the Wikipedia definition). If we don’t understand how Amazon categorizes R&D, we can’t make a fair comparison to France. If anything, IRS’s (very) broad definition of R&D helps France in that Amazon’s R&D spend isn’t truly R&D in the colloquial sense (or the Wikipedia definition) In other words, Amazon’s R&D spend is likely overstated (based on what an average person would consider “R&D”)

p1esk 3y ago

It also includes the cost of Amazon Prime video content. I don’t know why he called it R&D.

marcus_holmes 3y ago

In Australia we have a tax break that means 80% of all R&D costs are repaid by the government. Everything we can ever possibly classify as R&D is classified as R&D. If I take a dump on company time it's R&D because I'm a software dev and therefore thinking about developing stuff while I'm in there.

mkj 3y ago
That's not actually allowed, it's meant to be research with an "unknown outcome" or some similar wording. But lots of companies ignore yhat and claim regardless.
- marcus_holmes 3y ago
  Yeah, playing with the wording for the claim is always fun :) How the huge mining companies get away with claiming so much is beyond me. But they do.
- roenxi 3y ago
  Interpreting that is my least favourite part of the R&D tax incentive - as far as I'm concerned practically everything has an unknown outcome. I can't figure out what we're doing in software and sometimes that even stretches to include after a product has been built. Most ideas have been had before in some form or another - it is just nobody at this company knows about it. But genuine R&D would look very similar. There isn't a good test to distinguish "I don't know how to do this thing" from "nobody knows how to do this thing". I don't have the time, resources or inclination to know what everyone else knows. And then having to second guess what the tax office thinks everyone knows, because I know they'd accept some of the things I'm doing as research. It just isn't clear where they think the line is.
orbisvicis 3y ago
Wait so if I'm a software dev in Australia whose hours are classified as R&D, and my employer pays a 20% tax rate, can I file my withholdings reduced by 80% too?
- 3y ago

saratogacx 3y ago

When I worked there I had to fill in the forms for my team (Internal tools development). R&D was for all new feature development, time spent working on tickets/support/etc. were all non-R&D. Typically a 6:1 ratio R&D:not.