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Comment by cobbzilla | Hacker News Reader

Not entirely accurate. An unprofitable company that is acquired for its tech or team might have a huge amount of tax credits that they can’t use, but the acquiring company can. This can make an acquisition more attractive, even if the target company never made any money.

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You are right that it creates residual value which might be purchased for value (probably at a discount.) However, it doesn't help the startup actually pay the bills while it operates.

Historically, the R&D payroll just wiped out same year revenue and you essentially did cash accounting. After Section 174, you had to finance the R&D by borrowing or just hiring less.

This only makes sense if you have taxable income :))) and if you dont in the near term, the present value of those tax credits are lower.

You won’t lose the tax credits they only get time shifted.

I was responding to “The only companies this affected are those right at the margins of becoming profitable.”

It also affects wildly unprofitable companies that have burned lots of cash and never made any money.

And you do “lose” the tax credits upon acquisition - they’re not only time-shifted, they are company-shifted.

>> You won’t lose the tax credits they only get time shifted.

Yes, from a value perspective you do not lose the tax credits. But from a "cash" perspective, how do I pay my tax bill in years 1, 2, 3, 4?

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