4 ms·
This doesn't quite fit into the article and is probably too inside baseball for a general business audience, but as I see it, there’s a real and serious argumen
by dashqueen 1y ago
This doesn't quite fit into the article and is probably too inside baseball for a general business audience, but as I see it, there’s a real and serious argument to be made here about how Section 174 changes restructured the cost architecture of tech employment (yes, even for big, cash-rich companies). When salaries could be fully expensed, the effective marginal cost of headcount was lower. Amortization means the same engineer now triggers a significantly bigger near-term tax bill. At scale, that’s a serious shift in how labor costs flow through the P&L… functionally, op-ex becomes capex, and cash flow implications for big players run into the billions. But maybe it’s me!
- walterbell 1y ago> op-ex becomes capex i.e. some humans get the same tax treatment as humanoid robots, while LLMs ("AI") are always deductible as op-ex, regardless of function. Draft 2025 spending bill in Congress would revert Section 174 changes for 2026-2029.
- nickff 1y agoOnly external LLM use is ‘always deductable as op-ex’. If you build your own server farm and/or developer your own LLM, those are capital expenses which must be depreciated.
- walterbell 1y agoWhat percentage of LLM use is based on internal purchase of $30K H100 GPUs? OpenAI projected 2025 revenue is $12B.
- reactordev 1y agoContractors licking their lips at the prospect of being a clients op-ex. I think you’re right and hence the slow down in hiring top talent for top dollar.
- demosthanos 1y agoIsn't this literally the content of the article? What you just wrote down is basically this paragraph from TFA: > And so, on schedule in 2022, the change to Section 174 went into effect. Companies filed their 2022 tax returns under the new rules in early 2023. And suddenly, R&D wasn’t a full, immediate write-off anymore. The tax benefits of salaries for engineers, product and project managers, data scientists, and even some user experience and marketing staff — all of which had previously reduced taxable income in year one — now had to be spread out over five- or 15-year periods. [0] https://news.ycombinator.com/item?id=34627712 https://news.ycombinator.com/item?id=34627712