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If you need more things to fix: * Software R&D Amortization - taxes on make-believe profits * Patent law - protect small businesses from patent trolls * Auto
by siliconc0w 2y ago
If you need more things to fix:
* Software R&D Amortization - taxes on make-believe profits
* Patent law - protect small businesses from patent trolls
* Automate government-driven compliance standards - enable small businesses to sell into large companies/government entities, automatic certification when using pre-approved cloud solutions.
* Healthcare insurance - employees of SMBs automatically get access to medicare
- superfrank 2y agoCan you remind me what the issue with software R&D amortization (or point me to something that explains it)? I remember reading about the issue in the past and thinking it was a problem, but I've forgotten all the details.
- romanhn 2y agoI assume they're referring to Section 174 changes. Here's a primer: https://blog.pragmaticengineer.com/section-174 https://blog.pragmaticengineer.com/section-174
- singleshot_ 2y agoThis seems like a very strange take on 174. The author seems to be saying that all developer expenses can be expensed under old 174, but that’s not true (under my reading). My take was that exclusively research and development - where you are unsure of the outcome - is eligible under old 174. Notice the analysis of big companies and their tax bills. Author notes that Google only expensed software development expenses until the software met some qualification threshold. After that, it’s not research anymore. What am I missing?
- throwaway5959 2y agoFrom what I understand a lot could be classified as R&D. More than one would think.
- singleshot_ 2y agoRead 26 CFR section 1.174-2. “Activities intended to discover information that will eliminate uncertainly concerning the development or improvement of a product.” Specifically, check out example three in this section. I would be very careful about sweeping all my expenses in this category, but my familiarity with this part of the law is not deep. I’d love a 174 practitioner to jump in here but that might be asking a lot.
- cameroncairns 2y agoNot a practitioner, just a startup cofounder affected by these changes.. not legal or tax advice. You can read the applicable text here: https://www.law.cornell.edu/uscode/text/26/174 https://www.law.cornell.edu/uscode/text/26/174 Section 174(c)(3) ``` (3) Software development 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. ``` That being said... it's complicated: https://www.thomsonreuters.com/en-us/posts/tax-and-accounting/section-174-expenditures/ https://www.thomsonreuters.com/en-us/posts/tax-and-accountin... We've heard a mix of advice from various tax professionals on what should be classified as R&D or not. The messaging gets expecially mixed since the R&D tax credit is often handled by a 3rd party that specializes in it. The company specializing in the tax credit may be incentivized to classify as much of your activity as R&D as they can, since they are usually paid a percentage of the total credits they are able to claim for your company. It certainly complicates running a software company. My cofounder and I need to look at the amortization schedule before making any engineering hire as we basically need to consider their salary nearly 100% R&D. I imagine it's even more complicated for founders with overseas teams. It would certainly be easier for us to do business if Section 174 was revised :)
- selimthegrim 2y agoDoes 174 apply to SBIR money?
- dmoy 2y ago
- candiddevmike 2y ago> * Automate government-driven compliance standards - enable small businesses to sell into large companies/government entities, automatic certification when using pre-approved cloud solutions. I don't see how this will end well. I appreciate the reasoning behind it, but this is not a good solution. I'd prefer to see more "startup friendly" compliance frameworks that don't require tens to hundreds of thousands of dollars and make both the startup and their customers satisfied with the outcome. Something like a SOC2-lite that isn't so onerous but still provides a decent snapshot of their current situation from a third party's perspective.
- SR2Z 2y agoYeah, the only thing worse than the current status quo would be giving some SV startups a privileged position as gatekeepers for regulatory compliance (the Watershed strategy).
- cj 2y agoThis is (kind of) starting to happen. See Vanta ($100m+ funding), Secureframe ($50m+ funding), etc.
- stackskipton 2y agoI'd also prefer to see these standards go away. I haven't seen any proof they are providing meaningful security at any company I've been at and several of them have had massive hacks despite being SOC2 on paper. They also eat up InfoSec time instead of being productive on meaningful stuff like "Hey, are patching everything?" Most of these compliance just seem like barber licenses. A way for existing entities entrench themselves.
- jacobr1 2y agoVanta/Drata and other are starting to build solutions that are somewhere in-between checkbox compliance and real security. To the extent they integrate with your cloud providers and security tools, they can validate you have secure settings, active monitoring, and have remediated the things that have been flagged in a timely manner. Doesn't mean you are secure, but does ensure some baseline tablestakes.
- jrockway 2y agoDid we even fix Section 174 yet?
- 1auralynn 2y agoNo.
- jandrewrogers 2y agoOf these, the Section 174 debacle (software R&D amortization) is arguably the problem that needs to be addressed most urgently.
- guyfromfargo 2y agoCompletely agree. I am a bootstrapped SaaS owner and we cleared about $1M in revenue, $1,200 in profit, and $90k in taxes. Bootstrapping a tech company in a post Section 174 world doesn’t even seem feasible. I can’t believe this issue isn’t being taken more seriously.
- ec109685 2y agoGiven you’ll eventually get that full software deduction tax break back, just spread across several years, I am surprised there aren’t companies that will finance that to have the money upfront (with a fee of course :( )
- raincole 2y agoBut most startups get broke in several years, and codebases can't be repurposed as easily as, say, a fries-making machine, so the fee need to be very high to compensate the risk.
- csomar 2y agoNo one cares because most software developers are employed at big companies that can amortize. Even YC will probably just increase its seed instead of complain and consider it a "cost of business". This affects only marginal people. I am interested to talk with you about this if you want (feel free to reach, my email is in my profile).
- re-thc 2y ago> Even YC will probably just increase its seed instead of complain Does it even impact these type of companies? 90% of the time at this stage you'll have very little income compared to expenses.
- downrightmike 2y agoHealthcare insurance - employees of SMBs automatically get access to medicare This puts you in the same company of abusing the system as Walmart, the nation's biggest welfare queen. Employers should just have to give health benefits. You want workers, you pay benefits. Period. Maybe then you all will get on board for a single payer system. Its what you want, but only in fits and starts. quit fucking around already.
- stetrain 2y agoI really don't want my at-will employment status to be the arbiter of whether an unforeseen health issue will bankrupt me. Tying either private insurance or public insurance eligibility to your employer seems like a bad pattern we should be trying to get away from.
- readyman 2y agoGood luck convincing employers of that.
- candiddevmike 2y agoIndeed, that's why we need the government to step in.
- nurple 2y agoIt's a bad pattern for the employee, but a good pattern for employers and the healthcare industrial complex. The possibility that you could be bankrupt if you let your insurance lapse is an enormous concern for employees that may want to leave but can't; much more powerful, and cheaper, than golden handcuffs. COBRA is a joke, as if most could afford multi-thousand dollar a month bill when unemployed. What that communicates to me is that those in power, both of the gov and of businesses, are primarily concerned with forcing productivity to make line go up than they are with incentivizing treating people humanely. But really I don't think that's so surprising considering the timeline we find ourselves in.
- 2y ago
- jaypeg25 2y agoAmortization (174) probably isn't getting fixed this year.
- dbancajas 2y agoCan you expand on the last one? Is there no market (providers/demand) for this right now?
- robertlagrant 2y ago> Automate government-driven compliance standards - enable small businesses to sell into large companies/government entities, automatic certification when using pre-approved cloud solutions. This is something the market can solve. You can't lobby it into existence.
- Justsignedup 2y agoHow about health insurance not being tied to profits. Startups pay the full brunt of health insurance since they don't have real profits they have nothing to write off. Meanwhile large orgs get to write off a ton of profits as Healthcare costs for employees. So startups tend to have real garbage insurance. As someone older with kids startups are getting more and more prohibitive because I need that Healthcare. Maybe startups should be a young man's game. Maybe not.
- miah_ 2y ago"Maybe startups should be a young man's game." No. Anybody of any age should be able to take part in labor, otherwise you're arguing for ageism.
- lol768 2y agoRadical suggestion (maybe I'm too British): health insurance not being tied to employment or work whatsoever?
- joelfried 2y agoMillions of us have been wishing for that our entire lives. We have about as much say in it as you do.
- gbacon 2y agoHere’s a radical suggestion: stop calling welfare-for-doctors insurance. If you want insurance, those are known as major-medical policies under which the sniffle visits are still the patient’s responsibility — just like how insured car owners pay for their own oil changes. With “health” “insurance,” neither side has price sensitivity. Patients ask whether it’s covered and if so, back the truck up to get as much as possible. Physicians see enormous pots of money in tax-favored plans and seek to scoop out as much as they can. The inevitable result of such an awful system — that traces back to workarounds on executive pay limits imposed during the FDR administration — is unbounded price increases. Politicians scream about getting spending under control, and regulators impose rationing. This is a terrible system, but it’s a self-inflicted wound. In the U.S., at least, we’re seeing cash-only practices become more common. Their fees are affordable because their customers pay out of pocket and because they don’t have to hire entire departments just to deal with “insurance” providers.
- cde-v 2y agoAccounting regs are meant to reflect reality, not enable shitty startups
- araes 2y agoWhile you're there, try to help the Army National Guard Incentive Management System, or GIMS, not have multi-year downtimes, while the corporate sector wrings their hands over minutes. It's funny, yet hurtful to read. They exist in different universes. > the system crashed in late 2018 and was inoperable for about 10 months; another 10-month outage occurred in 2021. While the system was down, bonuses had to be filed through a complicated manual process, creating a backlog that states are still trying to fix. (2023 story) [1] > Two adjutants general, top commanders in their respective states, described discovering their staff tracking enlistment bonuses on dry-erase boards or through email traffic and handwritten notes. [1] Sorry, your bonus is goin around on somebody's handwritten note somewhere. Also, see if you can maybe do something about that VA medical data system. Heard they still hate it last reference. [1] https://www.military.com/daily-news/2023/10/27/soldiers-unpaid-national-guard-hasnt-paid-out-thousands-of-enlistment-bonuses.html https://www.military.com/daily-news/2023/10/27/soldiers-unpa...
- eru 2y ago> * Healthcare insurance - employees of SMBs automatically get access to medicare Perhaps better decouple healthcare insurance from employment status? (Perhaps remove the tax dodge where companies can buy health insurance cheaper than individuals can?)