Both HN and reddit seems to have fallen to the trap of "good, none of the companies were doing research and they deserve it".

In terms of accounting, Companies get taxed on their net profits. i.e Revenue - business expenses - employee wages (salaries, bonuses, commisions) - interest paid on loans - depreciation.

It's baffling because if not all employees are equal now in terms of accounting.

Example:

With flat 21% tax rate for US corporations.

If you made $100k in a year paying $70k for a salesrep, you only get taxed on (100-70) = $30k as net income. You pay tax bill of $6,300. This seems is fair because $30k is what the company has in cash in bank before paying taxes.

If you made $100k in a year and had a $70k dev working for you, get get taxed on (100 - (70/5)) = $86k. Developer salaries have to be claimed as R&D which get ammortized over 5 years. You get taxed $18,060. That is 3x the tax for hiring a developer instead of a salesrep.

Suppose you raised $100k and paid no salary to yourself, but paid all $100k to hire two developers. You have $0 in net income, but still pay (100-(100/5)) * 0.21 = $16,800 in taxes.

That $16,800 is a hole in your pocket. Negative balance. So you either stop hiring developers or be out of business.

So those who are cheering this is a good thing, this will lead to more layoffs. Companies will not pay as high of comp as they used to.

Expect a stream of layoffs across small companies who don't have enough cashflow to survive the amortized tax bill over 5 years. I expect big tech to continue their layoffs since their stock price is closely tied to their net income and they have to show that as always growing.

It's not a good thing for the economy either.

good. i bet none of those companies were doing research anyway.

most are getting what they deserve just because they claimed R&D tax credit to install and set the title of a wordpress instance.

just report it as the regular blue collar work it is and not suffer from amortization.

... but for the few 5 startups really doing something innovative, yeah, I'd start to research where to move.

I am still unclear what expenses are being taxed differently now that should not be.

What are the expenses for software R&D that aren't salaries and/or depreciation of equipment?

This is a serious questions, every time this comes up I ask this question and no one can provide examples and I feel like it should be super easy to produce examples.

Baffling?

It's software engineering being taxed exactly how all other forms of engineering R&D has been taxed for decades.

Welcome to the maturity club.