The difference between a fermentation system and software is that right now, software changes fast enough that five years is a long time.
While there are software that are still in use from five years ago, there are plenty of obsolete software no one is still using made five years ago.
Is 3 years reasonable?
If we are making say, a point-of-sale software rolled out in a fast food franchise (let’s take Chick-fil-A since they have edge Kubernetes deployments), is it reasonable that we won’t add features to that software in 3 years? Perhaps.
What about bug fixes? Is that expense or should we expect time spent on bug fixes to also be depreciated in 3 years?
What about configuration? Does configuring that POS for new menu items count as software development, and therefore needs to be depreciated over the next 3 years?
Chick-fil-A has edge Kubernetes. Does the install and implementation itself counts as “R&D”? If we argue that configuration can be expensed, then would writing manifests be depreciable or not? What if we use “infrastucture as code” tools such as Chef?
What about say, excel sheets and macros? Or forget macros — just basic use of a spreadsheet. Some manager add in a summation to a column to compute totals. Very basic stuff. Is that software development? If it is, would that be depreciated over 3-years?
If we argue that this is normal use of excel and should not be depreciated, then why wouldn’t my normal use of a compiler and editor also count as normal use and should not be depreciated?
Whether it is 5 years or 3 years, the point is that unlike physical capital goods, software changes very fast, even if the underlying hardware wasn’t changing that fast. It is not always that expert designers build them — software can also be written in a way where end users modify them. We also use software to make software, and can rapidly change our tooling in a way that we cannot with physical capital equipment.
I see the merit in categorizing software as capital, from an economic theory point of view, but software also has its own dynamic that is distinct from physical capital equipment. A tax code that does not acknowledge that can bring more overall harms to the society.
The tax code accounts for that by providing different depreciation schedules for different kinds of assets. For software the catch-all depreciation schedule is 3 years: https://www.irs.gov/publications/p946.