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This is a topic about which I'm very passionate. I've written my congressional representatives several times. I've posted on LinkedIn. I'm raising awareness wit

This is a topic about which I'm very passionate. I've written my congressional representatives several times. I've posted on LinkedIn. I'm raising awareness with my close colleagues. I'm trying to beat the drum as much as I can. There is a minor win that was just advanced in the House yesterday[0] to delay US onshore amortization through 2025 via The Tax Relief for American Families and Workers Act of 2024[1]. It doesn't touch offshore amortization. It's not enough. I was geared up to start a business this year; this, specifically, has put the brakes on it. I've written as much to my congressional representatives. I'm doing research into what it would take to incorporate in another country, and the implications therein, if it comes to that. I'm going to sign up to https://ssballiance.org/ https://ssballiance.org/, as telesilla recommended. Let's beat the drum together, folks. [0] https://www.voanews.com/a/7448071.html https://www.voanews.com/a/7448071.html [1] https://www.finance.senate.gov/imo/media/doc/the_tax_relief_for_american_families_and_workers_act_of_2024_technical_summary.pdf https://www.finance.senate.gov/imo/media/doc/the_tax_relief_... edit: formatting

lizhang 3y ago
What does the delay in [0] mean for the stories in the twitter thread? Would they be able to get their tax payment + penalty back? Or would this delay only affect the 2023-2025 tax years?
eropple 3y ago
> It's not enough. I was geared up to start a business this year; this, specifically, has put the brakes on it. I've read a little about this, but not a lot. How has this put sufficient drag on starting a business that it's impractical to go from zero to one? Is there an aspect of the business model that's particularly impacted?
- bjclark 3y ago
  Zero to one is considered “R&D” and that’s what this entire thing is about.
  - eropple 3y ago
    I am aware of that part, yeah. It's a shitty change, one hundred percent, and I'm glad to see folks like Wyden trying to unwind it. At the same time, I've owned small software businesses before, and I've started/not started new ones based on whether I thought it would work out. Where I am unclear is what sorts of business plans, on day zero, would be suddenly nonviable when it was viable before, so suddenly overwhelmingly difficult, as to cause such discouragement. Is there a good chance of recategorization pushing a very marginal business off the cliff? Sure--that Twitter thread, where there are enough details to read in, has a lot of examples of marginal businesses having trouble (mostly because of not being able to plan in the change, which really sucks). But you don't have that on day zero, and going in with the aim to be that very marginal business is probably not the best of ideas. It's not a day-zero problem, and I am struggling to see where a small business with a business plan that was previously worth executing on is now not worth it because of this change.
    - p_l 3y ago
      Having to amortize salaries mean that a freshly starting company has to include any salaries paid as (software devs salaries)4/5(corporate tax rate) extra thing to budget - if they don't have access to necessary reserves up front, it might be enough to turn a marginal business out from starting at all.
    - pcai 3y ago
      imagine in year 1 you grossed 100k, spent 200k on salaries, but the new irs rules say you owe taxes on 60k of profits. To slightly simplify: it forces startups to pay taxes on profits that only exist on paper, with cash that is now much more scarce
      - koolba 3y ago
        > imagine in year 1 you grossed 100k, spent 200k on salaries, but the new irs rules say you owe taxes on 60k of profits. For a clearer picture on this it’s helpful to include the actual tax amount. With a corporate rate of 21%, the tax would be about $12K. Now that’s not zero, but it better shows the actual cost born in year one under this plan. The later years are important as well. As profits continue to flow in, the rest of the cost can be deducted from it. So it doesn’t disappear. Though you do lose a bit from the nature of present nominal being inherently worth more than future nominal amount. With todays higher rates, that’s an even larger factor.
- HWR_14 3y ago
  Your salary costs for all programming and other development can only be written off over a five year period instead of the year you incur them. That means if you are breaking even normally with 1MM of developer costs, the government will tax you as though you made 800k. Because it says 80% of the code they write is a long term investment and therefore needs to be written off over time like a company car or a drill press. For mature companies, it all evens out, because you write off the costs over 5 years and it's just a blip. You can just borrow that money as a corporate bond, creating a real but manageable cost. For growing companies, it's forcing you to set aside money now (in the form of a tax deduction) you won't get back until year 5. So your burn rate is going up. And, unlike a mature company where the cost decreases over time (by year 5 it was a one time blip), that's only to the degree your salary costs have been stable for five years. Every time you scale up engineering staff, it puts you more in the hole for another five years.
  - adrr 3y ago
    It’s not five years. It’s whatever the useful lifespan of the software. Web dev we usually did 2 years since that was the average lifespan of a web page. For public companies, they are incentivized to amortize over longer period because it hides expenses and can boost earnings that boosts stock price.
    - moron4hire 3y ago
      > 26 US Code Section 174, paragraph D - Treatment upon disposition, retirement, or abandonment If any property with respect to which specified research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.
      - adrr 3y ago
        I don’t get. It doesn’t say five years.
deleted 3y ago
[deleted]
lulznews 3y ago
>It's not enough. I was geared up to start a business this year; this, specifically, has put the brakes on it. Bro what? Were you starting the business specifically to get these deductions? (I’m genuinely curious, sounds like a fun regulatory arbitrage.)
- genmud 3y ago
  Taking a 30% hit on business income is a significant thing.
  - lulznews 3y ago
    Tech startups are usually “let’s take a gamble” not “let’s pencil in 30% tax deductions.” I’m all for not paying taxes but it’s not typically part of the calculus before starting something.
    - genmud 3y ago
      Which is why so many are having issues. Having to come up with a 30-60k per engineer on top of your expected salary burn rate can have serious impacts to a startup runway.

lizhang 3y ago

What does the delay in [0] mean for the stories in the twitter thread? Would they be able to get their tax payment + penalty back? Or would this delay only affect the 2023-2025 tax years?

eropple 3y ago

> It's not enough. I was geared up to start a business this year; this, specifically, has put the brakes on it. I've read a little about this, but not a lot. How has this put sufficient drag on starting a business that it's impractical to go from zero to one? Is there an aspect of the business model that's particularly impacted?

bjclark 3y ago
Zero to one is considered “R&D” and that’s what this entire thing is about.
- eropple 3y ago
  I am aware of that part, yeah. It's a shitty change, one hundred percent, and I'm glad to see folks like Wyden trying to unwind it. At the same time, I've owned small software businesses before, and I've started/not started new ones based on whether I thought it would work out. Where I am unclear is what sorts of business plans, on day zero, would be suddenly nonviable when it was viable before, so suddenly overwhelmingly difficult, as to cause such discouragement. Is there a good chance of recategorization pushing a very marginal business off the cliff? Sure--that Twitter thread, where there are enough details to read in, has a lot of examples of marginal businesses having trouble (mostly because of not being able to plan in the change, which really sucks). But you don't have that on day zero, and going in with the aim to be that very marginal business is probably not the best of ideas. It's not a day-zero problem, and I am struggling to see where a small business with a business plan that was previously worth executing on is now not worth it because of this change.
  - p_l 3y ago
    Having to amortize salaries mean that a freshly starting company has to include any salaries paid as (software devs salaries)4/5(corporate tax rate) extra thing to budget - if they don't have access to necessary reserves up front, it might be enough to turn a marginal business out from starting at all.
  - pcai 3y ago
    imagine in year 1 you grossed 100k, spent 200k on salaries, but the new irs rules say you owe taxes on 60k of profits. To slightly simplify: it forces startups to pay taxes on profits that only exist on paper, with cash that is now much more scarce
    - koolba 3y ago
      > imagine in year 1 you grossed 100k, spent 200k on salaries, but the new irs rules say you owe taxes on 60k of profits. For a clearer picture on this it’s helpful to include the actual tax amount. With a corporate rate of 21%, the tax would be about $12K. Now that’s not zero, but it better shows the actual cost born in year one under this plan. The later years are important as well. As profits continue to flow in, the rest of the cost can be deducted from it. So it doesn’t disappear. Though you do lose a bit from the nature of present nominal being inherently worth more than future nominal amount. With todays higher rates, that’s an even larger factor.
HWR_14 3y ago
Your salary costs for all programming and other development can only be written off over a five year period instead of the year you incur them. That means if you are breaking even normally with 1MM of developer costs, the government will tax you as though you made 800k. Because it says 80% of the code they write is a long term investment and therefore needs to be written off over time like a company car or a drill press. For mature companies, it all evens out, because you write off the costs over 5 years and it's just a blip. You can just borrow that money as a corporate bond, creating a real but manageable cost. For growing companies, it's forcing you to set aside money now (in the form of a tax deduction) you won't get back until year 5. So your burn rate is going up. And, unlike a mature company where the cost decreases over time (by year 5 it was a one time blip), that's only to the degree your salary costs have been stable for five years. Every time you scale up engineering staff, it puts you more in the hole for another five years.
- adrr 3y ago
  It’s not five years. It’s whatever the useful lifespan of the software. Web dev we usually did 2 years since that was the average lifespan of a web page. For public companies, they are incentivized to amortize over longer period because it hides expenses and can boost earnings that boosts stock price.
  - moron4hire 3y ago
    > 26 US Code Section 174, paragraph D - Treatment upon disposition, retirement, or abandonment If any property with respect to which specified research or experimental expenditures are paid or incurred is disposed, retired, or abandoned during the period during which such expenditures are allowed as an amortization deduction under this section, no deduction shall be allowed with respect to such expenditures on account of such disposition, retirement, or abandonment and such amortization deduction shall continue with respect to such expenditures.
    - adrr 3y ago
      I don’t get. It doesn’t say five years.

deleted 3y ago

[deleted]

lulznews 3y ago

>It's not enough. I was geared up to start a business this year; this, specifically, has put the brakes on it. Bro what? Were you starting the business specifically to get these deductions? (I’m genuinely curious, sounds like a fun regulatory arbitrage.)

genmud 3y ago
Taking a 30% hit on business income is a significant thing.
- lulznews 3y ago
  Tech startups are usually “let’s take a gamble” not “let’s pencil in 30% tax deductions.” I’m all for not paying taxes but it’s not typically part of the calculus before starting something.
  - genmud 3y ago
    Which is why so many are having issues. Having to come up with a 30-60k per engineer on top of your expected salary burn rate can have serious impacts to a startup runway.