Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of

RESEARCH TRIANGLE PARK, N.C. – A “who’s who” of the venture capital industry is just saying no – and emphatically so – to continued talk in Congress about changing taxes on VCs and how their firms do business.

Apparently some in Congress are listening to those concerns as well as other changes that could affect angel investors as well as initial public offerings of stock.

Update: But not the White House. “I believe that there will be some legislative changes in carried interest, although the exact parameters are still being negotiated,” The New York Times quoted Peter Orszag, White House budget director, as in New York on Wednesday. “But I think you’re going to see a change in the taxation of carried interest pass the Senate within the next few weeks.”

In a letter sent earlier this week by the , some 1,700 VCs, investors and entrepreneurs fired off a letter about the “carried interest” debate that would change this means of income to being taxable as ordinary income rather than capital gains.

Signers included Triangle and southeast VCs Dennis Dougherty and Mitch Mumma of Intersouth, Mike Elliott at Noro-Moseley Partners, David Jones at Southern Capitol Ventures, Art Pappas at Pappas Ventures, Jeff Clark and Scot Albert at Aurora plus banker Win Bear at Silicon Valley Bank.

Congressman voices support

Concerned VCs did receive some comfort from remarks made by Congressman Barney Frank. He also promised help for angel investors and for increasing the number of IPOs, which VCs and angels need for “exits” from investments.

As quoted at Private Equity Hub by a Boston VC,

• “We will exempt venture capital from the carried interest tax.”

• “We will not tighten the regulations on angel investing.”

• “We will fight back on any attempts to regulate or register venture capital funds.”

• “When this is passed, we will look to loosed [s-called] RegA to facilitate IPOs.”

Frank also said he was confident that the Senate would pass a bill by Memorial day and that a reconciled House-Senate bill should be ready to sign by July 4.

Text of the NVCA letter:

“Dear Senator:

“For decades, start-up businesses plus venture capital have equaled more jobs for the U.S. economy. In fact, companies currently receiving venture financing employ more than half a million people in our country today. These companies have added thousands of new positions each month throughout the recession and will continue to do so. And that is only the beginning of the story as public companies that were originally funded with venture capital account for 11 percent of America’s workforce. It is an economic engine that has worked for all our citizens and is the envy of the global economy.

“Capital gains tax status for carried interest has been a critical incentive for that engine as it rewards the long term, high risk investment that defines venture investment. But now a tax hike on carried interest could cut venture capital out of the equation at a time when we need those jobs most.

“If venture capital carried interest loses its capital gains status, many rising professionals and technologists will choose careers outside venture capital. Existing venture capitalists will take fewer risks on early stage companies and shorten their investment horizon to recalibrate the new risk / reward equation. If venture capital investment disappears, there is no other asset class which will fill this void as direct investment into unproven start-up businesses is too risky for traditional lenders, too long term for buyouts and hedge funds, and too expensive for angels.

“We are asking Congress to maintain the current capital gains tax incentive for venture capital carried interest.

“The venture capital industry remains committed to investing in promising start-up companies that will create U.S. jobs and improve the way Americans work and live. By maintaining capital gains tax status for venture capital carried interest you will be taking “less” out of “jobless recovery” – by supporting company formation, innovation and economic growth in the U.S.

“On behalf of the venture capital and start-up communities, we thank you for your support.”

The letter was signed by Kate Mitchell, the new chair of the NVCA who also is managing director at Scale Venture Partners.

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