Is there a legal definition of "development" that needs to be used? In the dictionary, the definition that most fits "software development" is "The application of techniques or technology to the production of new goods or services."

Which means that at the very least, companies should be able to classify at least some portion of salary costs as "not software development". Maintenance, bug fixing, useless meetings, etc?

As far as I can tell, the law does not define it, and the IRS has provided no guidance.

It would certainly be consistent with the spirit of R&E to not classify maintenance and bug fixes as R&E, and it would definitely reduce the sting of this change for established companies. Startups would still be pretty screwed.

Even during greenfield, you probably fix 5 bugs for every feature. It's just that the bugs you fix were ones you created yesterday and not something a customer reported in the version you shipped a year ago. Writing tax law that even makes people need to think about what is a bug and what isn't is insane. What was wrong with making it simple like (I assume) most countries where you just treat all salaries as expenses that are completely deducted? What would be lost?

Thank you for the first comment I’ve come across that points to the specific problem. Yes, this seems quite bad.

One could probably apportion some blame to the businesses who assumed a fix from Congress would be forthcoming, but on the whole it seems to me like a spectacularly il-conceived bit of the tax code that never should have been passed in the first place.

What's the reason for that? I can find a lot of coverage of the effects, and of efforts to change it, but why was it made that way to begin with?

Because long ago the politicians got this "brilliant" idea of requiring many things to not increase the deficit.

The result has been things that cost money are "balanced" by raising taxes somewhere--but politicians don't want to raise taxes. Thus we get all sorts of garbage that fiddles with the details without "raising" taxes, but "raises" revenue--often by pulling it forward rather than actually changing the total amount.

We have also seen a lot of things that employers used to simply pay changed to income for the employee but deductible--but that causes the FICA taxes to be paid in all cases and since an awful lot of employees aren't in a position to itemize those deductions are lost. Something that was tax free now becomes income, but they didn't "raise" taxes.

I'd like to take the idiotic idea and stand it on it's head: I would not permit *any* measure to fund itself. A measure would either be a tax bill or a spending bill, it would be prohibited for a bill to do both. That would remove much of the drive to create insanities like this and Congress could work on cleaning up all the garbage. To accomplish this, though, we will have to evict all those idiots who "promised" never to raise taxes (but are perfectly willing to vote for stealth increases that cause a lot more pain per $ raised than doing it honestly would.)

I'm not sure if this is true, but I've heard that the Republicans needed ways to offset the tax cuts made by The Tax Cuts and Jobs Act of 2017. One of the ways was changing the treatment of R&E expenses.

This is true - it was an accounting sleight of hand to make the tax cuts look paid for during Congressional Budget Office scoring