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It's pretty bad. It had a huge impact on my personally, I'm a small R&D shop and basically I have had to end all risky long-term research projects. In additio

• djfivyvusn 1y ago
  Just pledge copyright of contributions to eff or something.
  • bunnie 1y ago
    Work-for-hire open source contributions often already bear a copyright holder of the entity paying for the work. The problem isn't who is the copyright holder. The problem is that the license assigned says that anyone is free to use the code. Anyone is a set of people that includes the contributor, which then triggers the interpretation that the research is incrementally in the contributor's benefit and thus disqualified from preferential tax treatment. You'd need a custom license where everyone in the world could use the results except for the contributor, and then like, a source control system that hides the source files from the contributor's view of the repository.
    • anticensor 1y ago
      > a source control system that hides the source files from the contributor's view of the repository. How would that work? > You'd need a custom license where everyone in the world could use the results except for the contributor That one is incompatible with copyright laws in many countries outside USA.
      • hiatus 1y ago
        > That one is incompatible with copyright laws in many countries outside USA. How so? You can't sign away your interest in a copywrighted work?
        • jashmatthews 1y ago
          The USA hasn’t managed to completely impose their idea of intellectual property on everyone yet. Some countries you can’t sign away authorship even if you can commercial rights.
          • hiatus 1y ago
            Parent objected to: > You'd need a custom license where everyone in the world could use the results except for the contributor > That one is incompatible with copyright laws in many countries outside USA. Does authorship confer usage rights?
          • throwaway2037 1y ago
            I am unsure if I fully understand your point, so let me ask a related question to see if I understand. For many open source projects, there is a CLA (contributor license agreement) that must be signed before contributions can be accepted. The Free Software Foundation (which holds the copyright for most/all? GNU tools) is pretty in/famous for requiring it. Their reasoning: If there are copyright violations, they have the time and financial resources to pursue the violators. Are you saying that these CLAs and their intended purpose are invalid in some jurisdictions? If yes, please share some examples. To be clear: I'm only interested in "normal/regular" jurisdictions that have at least accepted the Berne Convention.
  • Retric 1y ago
    Create a shell company with an X$ investment. Have the shell company write code. (Or more risky pay your company to write code as a work for higher.) Devolve the shell contributing its assets to OSS. Take a X$ loss in that year. Argue that it is perfectly legal to the IRS.
    • jay_kyburz 1y ago
      I wonder of you could also just pay bounties for specific features to be written for OSS. Or have your shell company operating out of any other country.
      • irf1 1y ago
        Algora.io for OSS bounties!
• dataflow 1y ago
  > The rule as written means contractors who write Windows drivers could deduct their expenses (as they would have no residual rights to a closed-source work product), but contractors who write Linux drivers may not (as they would have some rights to open-source Linux drivers). Is it just me or are you conflating two orthogonal things? An open-source Windows driver would have the same issue, no? And a closed-source proprietary Linux driver privately written for some company wouldn't have this issue either, right?
  • bunnie 1y ago
    You are correct. I picked this example under the general assumption that the Windows driver would be closed-source, but you are correct that it doesn't necessarily have to be closed source. The problem goes with the license, not with the OS.
  • CBLT 1y ago
    You're right, the law text doesn't specifically call out the Windows operating system or the Linux operating system. The example you gave of Open Source Windows drivers is valid. The Grandparent's point about that "it double-dings open source developers" is still correct and poignant even with this clarification.
    • dataflow 1y ago
      > The Grandparent's point about that "it double-dings open source developers" is still correct and poignant even with this clarification. I feel like I'm missing what subset of people this is, exactly. We're talking about businesses here that would struggle with these tax rules. Which I guess is, mainly, contractors or startups. How common is it for such businesses to release their software as open-source, vs. as closed-source? I would've (naively) expected most paid OSS developers to be funded by large organizations/businesses that have plenty of money to fund them, not small businesses/contractors that would be severely impacted by this law. Is this actually a large set of people?
      • pabs3 1y ago
• Retric 1y ago
  You’re likely overreacting. It makes software temporarily 16.7% more expensive in year one if you’re operating a profitable company, but you do eventually get to deduct that over time. Pay 8% on a 4 year loan and that drops to ~4%.
  • demosthanos 1y ago
    Eventually, as long as you survive that long. As has been said repeatedly in this thread, this change is purely a boon for existing big tech companies that now have even less to worry about from startups. It takes a startup 5 years before they'll be playing on an even field with big tech. > if you’re operating a profitable company You keep saying this across this thread, and keep ignoring that Section 174 has now redefined "profitable" for tax purposes to include companies who: * Are in year 1 with no history of expenses to draw on. * Have spent <900% of their year 1 revenue on software development expenses. i.e., a startup that earns $1mil and spent $8mil in software dev expenses is only able to deduct 10% * 8mil = $800k of expenses, which means that as far as the government is concerned they made a profit of $200k and owe taxes on that on top of their already-net-loss of $7mil. You can keep ignoring this fact, but ignoring it doesn't help your case. If you want to argue that this is fine and dandy you need to explain why the above math doesn't prevent new companies from competing on fair terms with big tech.
    • Retric 1y ago
      > You keep saying this across this thread, and keep ignoring that Section 174 has now redefined "profitable" for tax purposes to include companies who: Because generating an asset IE software isn’t a pure loss that’s why you’re doing it in the first place. Companies with a cash flow problem are different than companies which an actual loss. > i.e., a startup that earns $1mil and spent $8mil in software dev expenses is only able to deduct 10% * 8mil = $800k of expenses, which means that as far as the government is concerned they made a profit of $200k and owe taxes on that on top of their already-net-loss of $7mil. That assumes 100% of expenses are software development related. But the numbers are imaginary so using your example taxes are 21% of 200k, so 7 million in losses = 7.042 million in losses. A 1/2 of 1% increase, the sky is fucking falling. Further a competent account would likely want you to carry the majority of those expenses to the future. Given the option many companies voluntarily did so because it made financial sense. You can only carry 80% of losses forward a likely future issue, but these expenses don’t fall under that category.
• rayiner 1y ago
  > In addition to the research costs, I'd also have to pay taxes on the research costs mostly up-front. Significantly, if the project doesn't work out, I'm still out of pocket for the tax money. That’s how it works for every business! If Jim Bean builds a distillation facility it has to amortize the investment in that over time. If the distillation facility doesn’t pan out, then it doesn’t get a refund for the taxes paid.
  • qcic 1y ago
    It doesn’t matter. Jim Bean doesn’t compete with an R&D software company. The R&D software company does compete with other companies in different jurisdictions with better regulations.
    • monkeywork 1y ago
      Jim Bean competes with other beverage makers who also operate out of different jurisdictions that may have different regulations ... not sure your point is as much of a "gotcha" as you think it is.
      • throwaway-blaze 1y ago
        TIL that Hacker News readers think the Jim Beam whiskey company is called Jim Bean.
  • bunnie 1y ago
    The comparison with Jim Beam is misplaced. Both TSMC and Jim Beam already have to amortize their production equipment over several years. I'm not arguing that this should be changed. This is because the primary risk taken in a distillery build-out or a fab build-out is if there is market demand for a known product. It's primarily a business risk, not a research risk. Tax code is a reasonable tool to regulate business risk. The people this tax code change hurts are those doing basic research. In the context of semiconductors, that would be a company like ASML (except they are Dutch, so they can happily continue their research practices) who took a decades-long bet to build their EUV steppers. In the case of basic research, one could be spending millions of dollars on hardware prototypes when you know it can't produce any salable product. There's no upside profit to amortize expenses against: it's like building a distillery that you know can't produce a single drop of salable bourbon because you're working out a radical new distillation technique. In summary: in basic hardware research, one could be spending millions of dollars to put a whole system together just so you can learn how it fails. It's a true "expense", with no path to amortization. Now, in addition to making the right technical decisions, the tax law changes force the R&D teams to also consider how to amortize their experiments over many years. You now have have pressure from management to do things like stage prototypes and expenses in the right tax year so the company can continue to show a profit for the shareholders. You could argue that the lessons learned are perhaps IP that have "goodwill" value, but now you're opening a can of worms trying to price a fair market value on a negative result, and you're now having senior research staff spend more time arguing with accountants than directing research. You also have to get to that negative result within a tax year - which effectively penalizes any research project that takes more than 12 months to complete. Same-year 100% deduction of R&D expenses is simple and it reflects the actual nature of basic research risk. Yes, it allows companies to convert short-term windfalls into long-term research gains by converting taxable profits into research projects, but I'd argue that's not actually a bad social policy. I think US is probably unique among developed nations in having a tax code that punishes basic research; other countries at least allow it to be deducted. Some even allow super-deductions (e.g. you can deduct $2 for every $1 of R&D expense) or the research is explicitly subsidized through grants. The argument for special treatment of research is that pioneers put their careers on the line to discover new things, so the rest of us can live in risk-free comfort; so, as a collective we give them some reward for taking that risk. I suppose the counter-argument is that research incentives and subsidies are socialist "market manipulation" and violate the "free market" principle, and thus America is justified in sanctioning and trade warring with the rest of the world that is socializing basic research costs. That's an opinion one is entitled to hold, but we'll have to agree to disagree on that opinion.
• gbacon 1y ago
  “The power to tax is the power to destroy.”