A life-and-death scenario: Sm businesses forking over 100% profits to Uncle Sam
marketwatch.comTL;DR:
The tax change that Hansen and other software executives are taking issue with was signed into law by then-President Donald Trump in 2017, as part of a larger tax-code overhaul that slashed the top corporate tax rate from 35% to 21%.There's a bit more to it than that.
As a way to make those tax cuts appear paid for, they changed how R&D expenditures -- which includes software development on software that has ALREADY been commercialized -- has to be amortized.
This was a budgetary sleight-of-hand that made the tax cuts appear paid for.
Most small companies are LLCs, not Corporations, and therefore pay personal tax rates.
As a result, software and other tech companies now have phantom profits because their engineer salaries and other expenses are no longer deductions.
IRS guidance: https://www.irs.gov/pub/irs-drop/n-23-63.pdf