Hacker News Reader

Comment by Bukhmanizer | Hacker News Reader

Yeah I think there are a bunch of different reasons that corporations are doing less, interest rates are a major factor, but the point is that it isn’t exactly the “AI is taking our jobs” narrative that people want it to be.

View on HN

Starting in 2022, US companies could not deduct SWE salary expenses in the same year, only over 5 years like hardware CapEx. For big companies, this will roll over in 2027. Meanwhile, LLM expenses can be written off immediately as OpEx.

https://news.ycombinator.com/item?id=37494601

great point, thanks for sharing

This is probably the single dumbest aspect of US tax policy.

If you hire Canadian software engineers, you can dodge this and deduct the expenses in your Canadian subsidiary. If you outsource software dev to another company you can usually get away with expensing it.

That is a good point, my company recently expanded to Canada pretty aggressively and I wonder if this was a factor.

Historically there has been a brain drain from Canada to the US, but if Canada can set up favourable policies for companies maybe they can start reversing that.

Research outside the US = 15 years amortization?

https://www.grantthornton.com/insights/alerts/tax/2023/flash...

  The TCJA amended Section 174 by removing the option to expense SRE expenditures, instead requiring taxpayers to capitalize and amortize SRE expenditures over a period of five years (attributable to domestic research) or 15 years (attributable to foreign research)

You create an “arm’s length” Canadian subsidiary that then licences the software to you.

The Canadian government also heavily subsidises this. Smart of them to do so.

AFAIK the Canadian government’s ‘subsidy’ is to allow R&D expenses (but not investments) to be fully deducted in the year they are made. This seems analogous to the old rule in the USA.

They do more than this. In Alberta we got a 50% credit on salaries paid if we hired people with oil/gas skills into a non oil/gas company. Think ML engineers who have been dong advanced data science for geologists to find oil coming over to tech startup… and the government pays half their salary for you, which is already cheaper than America. And you get to fully deduct it.

And our government is busy prattling on about putting tariffs on Canadian maple syrup or something…

It seems like we're in kind of a lull that's being caused by expectations of what AI is about to be able to do. And these expectations could be completely wrong. But it's already causing changes in corporate planning and spending.

Agreed! Uncertainty to do with short term economic issues, medium term geopolitical risk (Trump, China, Russia, etc.), and longer-term issues (national debt, Medicare, etc.) also shouldn’t be underestimated.

Reply on news.ycombinator.com