Unlike many companies in the software industry, we have grown profitably for nine years without the need for any funding. Our success has been fueled by our ability to invest profits into our business, allowing us to improve our software and expand our operations continuously.
However, the 2022 Section 174 R&D tax credit changes have had an impact. This recent change affects many small, independent technology companies, including my company. We have been busy building products, making our customers successful, and making payroll. We are happy to pay our fair share of taxes on our profits. However, investing in software development is the engine that allows us to grow our company and hire more employees. Our tax laws must continue to reflect this reality.
I think the point of this law is to capture tax from companies in their growth phase, as the general public sees these companies as tax avoiders and their lack of profit as an accounting trick.
In reality, it will keep small companies small and less of a threat to big companies.
It isn't even that the deduction went away, it must now be amortized over five years (an accounting trick on the part of Congress to pretend they're not spending money they are).
This hurts businesses more the smaller they are, but paradoxically it also hurts businesses more the higher percentage of their revenue they spend in payroll. Literally if you give your employees a bigger reward for their work, you're hurt harder by this ridiculous law.
If you're a sociopathic CEO with 8-10 engineers whose work output isn't directly tied to profit, and you're paying out most or all of your profit in salaries, you're definitely going to be looking at letting a few of them go to ease the tax hit.
Would you recommend to keep on with favoring this accounting trick for fairness because previous businesses took advantage of it? If so, how/when should the legislator changes laws when needed?
> general public
Not sure what’s your definition, maybe “non-startup founders neither investors” ? I work in startup since a couple of years and all my employers did declare me as r&d while we where only implementing react or so without any “research” difference than a cabinet maker building a piece of furniture. This drives me nuts because I don’t contribute to my country tax while my income is on the very upper side comparing median.
This is just bullshit
Unlike many companies in the software industry, we have grown profitably for nine years without the need for any funding. Our success has been fueled by our ability to invest profits into our business, allowing us to improve our software and expand our operations continuously.
However, the 2022 Section 174 R&D tax credit changes have had an impact. This recent change affects many small, independent technology companies, including my company. We have been busy building products, making our customers successful, and making payroll. We are happy to pay our fair share of taxes on our profits. However, investing in software development is the engine that allows us to grow our company and hire more employees. Our tax laws must continue to reflect this reality.