Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

What the Section 174 Change Does

• Since 2022, US tax law treats all software development as R&D that must be capitalized and amortized (domestic over ~5–6 years; foreign over 15).
• Developer salaries can no longer be fully expensed in the year paid; only a fraction counts as a deductible expense each year.
• Result: a company can spend all its cash on dev salaries, show an accounting “profit” because only 10–20% is deductible, and still owe tax it has no cash to pay.

Why Many See It as Harmful

• Hits startups and bootstrapped firms hardest: they’re cash-poor and R&D-heavy, so they can owe tax while economically loss‑making.
• Forces founders to raise more capital or borrow just to pay tax on “phantom profit,” shortening runways and making some projects non‑viable.
• Favors large incumbents with steady cash flow and cheap credit, effectively deepening their moat against new entrants.
• Particularly painful for foreign contractors, whose costs must be amortized over 15 years—seen as a de facto tariff on offshore dev.

Is Software Really a Capital Asset?

• Pro‑capitalization side: software can generate value over years; treating dev costs like building a factory or internal tools matches expense to long‑term benefit and aligns with GAAP and some other countries.
• Critics: software value is highly uncertain, often short‑lived or zero; salaries are a terrible proxy for asset value; most work is ongoing maintenance intertwined with new features, not a one‑off asset build.
• Many argue this taxes unrealized, hypothetical gains, unlike art or physical goods where tax applies at sale.

Fairness vs Other Work and Industries

• Commenters note many white‑collar activities that clearly create durable assets (legal templates, branding, customer lists, processes) are expensed, not amortized.
• Software is explicitly singled out in the statute; other R&D often still has more flexible treatment. Some see this as arbitrary and discriminatory.

Political and Legislative Context

• Change came in the 2017 tax law as a budget gimmick to “pay for” corporate rate cuts under reconciliation rules; many expected it to be reversed before taking effect.
• Current proposals (e.g. the “One Big Beautiful Bill”) would partially or temporarily undo it, mainly for domestic R&D, sometimes retroactively.
• Several participants support fixing 174 but oppose tying it to a large, controversial omnibus bill.

Practical and Meta Issues

• IRS guidance tries to distinguish capitalizable “development” from deductible “maintenance,” but in modern CI/CD practice that line is blurry and costly to track.
• Some worry about regulatory capture: large firms can bear the compliance burden; small ones cannot.
• There’s internal debate about Hacker News being used to mobilize lobbying, with some seeing it as appropriate civic engagement and others as YC‑aligned rent‑seeking.