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OBBB signed: Reinstates immediate expensing for U.S.-based R&D

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342 points tareqak | 3 comments | 05 Jul 25 00:24 UTC | HN request time: 0.449s | source
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me551ah ◴[05 Jul 25 06:16 UTC] No.44470473[source]▶
I doubt if this will make much difference. Offshoring as a tactic emerged in the pandemic when companies realised that being “remote” works just as well.

Sure, foreign R&D still gets amortized over 15 years (NPV ≈59 % of a full write-off, so you “lose” ~8.6 % of your R&D spend in present-value terms, and only 6.7 % of the cost is deductible in year 1, creating a 19.6 % cash-tax gap). But offshore wages are often 50–70 % below U.S. rates:

• Even after the slower amortization drag, hiring at half the cost nets you ~30 % total savings on R&D headcount.

• On a pure cash basis you only need ~20 % lower wages to break even; most offshore markets easily exceed that.

• So the labor-cost arbitrage far outweighs the tax timing penalty unless your foreign salaries are less than ~20 % below U.S. levels.

In short: the 15-year amort rule hurts your tax deduction, but 50 %+ lower offshore wages more than make up for it.

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BobbyJo ◴[05 Jul 25 06:25 UTC] No.44470502[source]▶
This ignores the other financial and non-financial costs of offshoring: legal, cultural, temporal... a lot of the time, those close the gap.

On paper, offshoring has made sense the entire time, and yet here we are in 2025 and companies still hire American devs. Not only that, they often fly in foreign devs just to pay them more here than if they had just offshored to their home country.

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__loam ◴[05 Jul 25 06:31 UTC] No.44470525[source]▶
Yeah people have been offshoring then onshoring once they realize offshoring sucks since at least the 90s. I remember my dad, who was also a software dev, complaining about it 20 years ago. It always swings back. The network effect in huge hubs like SF and NYC is massive.
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1. fnordpiglet ◴[05 Jul 25 08:57 UTC] No.44471209[source]▶
I’ve been a part of the entire arc of offshored teams since the trend started in the late 90’s early 00’s. I’ve never seen it work. The primary issue is and always has been time zone related. While it doesn’t show to an accountant we do live on a sphere and there are implications to everyone. The solution is always to find some self contained effort for the remote centers but it never works because the entire company is pulling together and short of making the remote teams spin offs there’s no way to disentangle dependencies. And at some level even if you could management has to work cross regionally which isolates them from their center of power in the home office time zone. The root is the company is asking you to make immense personal sacrifice so they can save money if the model were to work. There is no upside to anyone other than the remote management in this situation so they burn out quickly and still fail because literally no one else in the company cares in any meaningful way. It’s unfair at its core and therefore fails.

The issues of quality and whatnot are at their core racist IMO but are made real because of the timezone issue. The norms and culture expected in the home time zones don’t translate easily and result in an impedance mismatch and a different measure of “good.” Because the remote team is isolated and unempowered they always struggle to adopt the standard of the team and to some extent can’t ever succeed in the quality space as it’ll be an ever shifting goalpost whose reasoning is effectively hidden. Then layer in the latent resentment on both sides and the whole situation is bound to fail, but the home teams have the advantage of being resident with the only management that matters.

I wish everyone involved would realize the experiment has failed. But CFOs are too powerful in most companies large enough to reasonably pull off outsourcing at all and the need for the CEO to please boards and investors who just operating off the financial statements and HBR white papers are too disconnected for why these efforts fail.

Unfortunately the current persecution of immigrants in the US will drive these arrangements more and more. Rather than on shoring local foreign talent with the collocated team, foreign talent will opt to avoid the fear society being birthed. This will lead to a strong incentive to follow talent to their home country leading to more imbalance in talent disoriented time zones. Maybe this would require everyone to figure out the above issues but I seriously doubt it. I think it’ll just make everyone less effective and not achieve anything positive for anyone.

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2. __loam ◴[05 Jul 25 09:28 UTC] No.44471355[source]▶
One of the most insightful comments I've seen on this site.
3. CalRobert ◴[05 Jul 25 09:32 UTC] No.44471378[source]▶
It seems like more American companies are noticing that Latin America has lots of intelligent, clever people who produce good work, and cost less. I have worked with a lot of Argentinians and really enjoyed it.

I'm in Europe now and it definitely is easier to set up calls with my South African colleagues than the American ones.