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National Venture Capital Association – Opinion on Tax Reform Bill And Entrepreneurship

The National Venture Capital Association (NVCA) issued the following statement after House Speaker Paul Ryan (R-WI) and Congressman Kevin Brady (R-TX), Chairman of the House Ways and Means Committee, unveiled the House Republican blueprint for tax reform.

“The tax code impacts the entrepreneurial ecosystem in two major ways—one in which tax policy has been effective and second where reform is desperately needed. Startups generally have to operate for years using investment capital to create and develop a novel product or service, and so the investment environment is absolutely critical to entrepreneurship,” said Bobby Franklin, President and CEO of NVCA.

“We have done a good job over the last 35 years of sustaining tax policy that encourages patient, long-term investment, and the country has benefited significantly as a result. This balance must not be upset. Where we’ve done quite poorly has been with rules in the code that seem to forget startups exist. Whether it’s trying to curb a perceived tax abuse that inadvertently sweeps startups into the definition or writing rules that focus only on the viability of large companies, such as the R&D credit which is practically useless for startups, too often tax policy just overlooks this ecosystem.”
“Fortunately, House Republicans specifically ask in their blueprint for bold ideas that encourage ‘job growth and opportunity for all Americans.’ We applaud this openness to fresh ideas and would remind them that without startups there would be no net new job growth in the U.S., making it all the more important to look at tax reform as an opportunity to strengthen startup formation,” added Franklin.

“As the conversation progresses, we encourage lawmakers of both parties to not lose sight of startups and to think critically about how the tax code can be reformed in ways that encourages more entrepreneurial activity, creating a pipeline of new U.S. companies. For example, we need to stop penalizing startups for investing in innovation by providing them a safe harbor from the Section 382 Net Operating Loss rules, make the R&D credit work for innovative startups, allow companies to use the same accounting rules when they acquire a startup that they do for other acquisitions, and reform 409(A) to reduce an unnecessary tax regulatory burden on startups.”

About National Venture Capital Association

Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, the NVCA serves as the definitive resource for venture capital data and unites its member firms through a full range of professional services.


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