Will US Companies Hire Fewer Engineers Due to Section 174
Related: Taxes
Key Takeaways
- Previously, companies could offset income by development costs.
- With Section 174 which was introduced by [[Donald Trump]] in 2017, came into force at the end of 2022 it's not possible anymore.
- Now companies can only amortize R&D costs over 5 years and 15 years for offshore R&D.
- It affected tax bills starting from 2023.
- That means that they have a peak tax load in 2023 and this will smooth out for the next 5 years.
Consequences
It affects both small and large companies that do not have sufficient free-floating cash and those operating very close to breakeven.
It forces companies to move their intellectual property and development from the US to more favorable jurisdictions: Google + Switzerland is a good example.
References
The Pulse: Will US companies hire fewer engineers due to Section 174? - The Pragmatic Engineer
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