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I have said this before and attracted downvotes for it, but here goes. There are two possible arguments here to try, and I have only ever seen people lobbying
by pclmulqdq 3y ago
I have said this before and attracted downvotes for it, but here goes.
There are two possible arguments here to try, and I have only ever seen people lobbying against this change use the one, less persuasive argument. That argument is what I will call the "incentives" argument: that change in the rule provides bad incentives against doing R&D. This argument goes along the lines of "this will cost jobs for R&D workers" or "this will reduce the competitiveness of the US." The other possible argument (that I have not seen cited) is that "R&D" work can be operational, and that forcing capitalization of R&D expenses is a bad accounting practice. This Twitter thread only argues the former.
The glaring problem with the incentives argument is that it gives up the point that the ability to operationalize R&D work is a subsidy for technology and software companies. This is equivalent to asking for a subsidy at a time when startups can pull $100 million with no product and other technology companies are reaping record profits. That is not a particularly persuasive argument, and it triggers bad emotional reactions from people. If not for the SBIR companies getting absolutely shafted, the responses to this argument I have seen from non-tech people range from "fuck you" to "deal with it."
The accounting argument is boring and sort of technical, but also a lot harder to argue against and doesn't trigger a negative emotional reaction. All of the people making the rules will understand it, and the IRS could even make the clarification on what is and isn't "R&D" on an accounting basis without an act of congress. They have kind of done this, but have not been pushed nearly far enough.
- tracerbulletx 3y agoHaving been an accountant early in my career before becoming a software developer, I'm amazed that this isn't the primary argument.
- pclmulqdq 3y agoI (shamefully) have an MBA, and I learned a lot about accounting during that process. Whether basic research ought to be operationalized or capitalized when looking at company valuation was actually a bit of a point of debate, but both sides have strong arguments. What definitely shouldn't be capitalized is "new feature for my existing software" which pretty clearly is capitalized under the current rules.
- Dalewyn 3y ago>the responses to this argument I have seen from non-tech people range from "fuck you" to "deal with it." Two factors also don't help matters either: * Most people, which perhaps surprisingly includes most commenters here, don't understand what taxes are levied against or what losses and amortization even are. You can't effectively argue against something you don't understand. * Of the people who do understand taxes and income/loss sheets, it's only the business owners and accountants who like putting as big a number as possible under losses to reduce net profit and thus taxes owed. The commons rightfully see it as tax avoidance, which unsurprisingly is met with "fuck you".
- wernercd 3y ago"tax avoidance" Otherwise known as what every sensible and smart person does because that's not the "governments money". AKA: "How dare people want to keep their own money and not freely give up larger and larger percentages to ever larger government programs that are inefficient cesspools of mismanagement and corruption". I'll match people saying "fuck you for wanting to keep your own money" with a fuck you for supporting the destruction of businesses on the notion that it's the governments money in the first place.
- BenFranklin100 3y agoI bet you if the commentator you’re responding to owns a home, they take the mortgage home tax deduction.
- kolanos 3y agoCan't you only deduct the mortgage interest? Or are you referring to something else? The mortgage interest deduction turns out to not be very much in practice, in my experience, anyway.
- ghaff 3y agoIt used to be a bigger deal. Yes, housing prices (in some US geos) have gone up a lot but so have standard deductions and interest rates are still relatively low historically. Absent relatively large charitable donations, big mortgage interest payments, etc., itemizing doesn't make a lot of sense for many people.
- deleted 3y ago[deleted]
- mixmastamyk 3y agoFront loading taxes on a new business makes little sense no matter the industry. Long term view is that more taxes are generated from a surviving, healthy business.
- jackthetab 3y agoSo, just what _is_ "the accounting argument"? I don't know enough accounting to figure it out for myself.
- BenFranklin100 3y agoFor one, companies will be encouraged to classify R&D as operational expenses where they can. This distorts the overall picture of the business’s fundamentals.
- username332211 3y agoI was under the impression American companies already have to maintain 2 sets of books anyways. After all, the IRS doesn't use GAAP.
- ghaff 3y agoIt's probably more than that. You have external GAAP, non-GGAP, constant currency vs. non-constant currency metrics, all sorts of internal accounting measures. With larger companies it's complicated. (Smaller companies it's more about cash flow even if they consider taxes as well.)
- baybal2 3y ago[dead]
- BenFranklin100 3y agoMany early stage SBIR companies, especially those in the life sciences which are always very R&D heavy, will be forced to close up shop.
- deleted 3y ago[deleted]