Bottom line: If a company makes $1MM in revenue and pays $1MM in salary, they owe taxes on $800k profit. Yes, this is actually the law now.
I guess the one area this tax law particularly affects are bootstrapped revenue-generating (non-VC funded) startups with high dev costs? i.e., actual running businesses not playing with monopoly money.... which maybe Elon doesn't care about....
Another poster had a good summary: https://news.ycombinator.com/item?id=42379288
"Note: these changes were signed into law in 2017 but came into effect in 2022"
Like I thought, changes were meant to be a time bomb if the GOP wasn't in control.
The salaries are not an asset, they are the cost of creating the asset. They are capitalizable similar to (but on a different schedule than) costs of acquiring software that is not developed in house.
It's more like if before the law was passed they'd hire 5 new devs, now they can only afford 3 and have to make do until more revenue comes in
(In 2024, if a company paid salaries for a software developer, a novel writer, and a cook, does each of those 3 positions affect taxes in the same way?)
(c) Special rules.
(3) Software development. For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.
surely tax changes come in the form of congressional+presidential bills and amendments
1: https://irc.bloombergtax.com/public/uscode/doc/irc/section_1...
Same thing happened when they restructured tax code to interpret withholdings differently. Everyone saw more on their paycheck temporarily (and they gave speeches about it!) but owed more later if they didn't change their withholdings.
So it’s likely the second — and was likely used in part to pay for those very same withholding changes! Or the then-new tax-exemption for lobbying expenses.