If as media reports have said – President Obama’s proposed federal budget is “dead on arrival” on Capitol Hill – then that’s good news to the organization that represents most venture capitalists.

On Wednesday, the National Venture Capital Association issued a statement reiterating its opposition to proposed changes in how gains from VC deals are taxed. The statement reaffirms NVCA’s adamant opposition to the idea, which dates back to 2010. 

Jennifer Connell Dowling, senior vice president for federal policy at the NVCA, issued the following statement: 

“Today President Obama unveiled his budget which, once again, included a provision to change the capital gains tax treatment for carried interest.

“This inclusion is entirely consistent with the President’s previous proposals, as is his lack of distinction between the asset classes that employ carry.

“While we remain disappointed in the President’s disconnect between support for venture capital and the startups we fund and a tax proposal that discourages long term investment in these critical companies, we are steadfast in our position that carried interest for venture is a capital gain and continue to advocate for our ecosystem.

“It is important to understand that the President’s budget submission is largely symbolic and will not be enacted into law.

“The federal budget process and fundamental tax reform discussions are expected to continue on Capitol Hill for some time and NVCA is engaged with policy makers on these issues.

“We will certainly keep you informed of any developments.”

Rebutting WSJ Article

Dowling also reacted negatively to a Wall Street Journal article (subscription required) about carried interest. In a blog, she wrote:

“Tuesday’s op-ed by John Steele Gordon about carried interest tax treatment in Wall Steet Journal failed to make a number of clarifications specifically about venture capital funds. We posted the following comment on the piece, but want to share these broader points here at NVCAccess as a reminder of our position.

“The piece… needs some clarification in three areas as it relates to venture capital funds, which also receive carried interest when the companies in which they invest succeed long term:

“1. Venture capitalists do put their own money at risk, alongside the institutional investors with which they partner, to invest in companies. They absolutely have a downside should their companies fail.

“2. Venture capitalists do work side by side with company founders offering the same type of sweat equity as the entrepreneurs. Partners at venture capital funds are intimately involved in the operations of their companies, particularly at the earlier stages when hands on experience is needed most. Venture capital firms do not have “staff” that handles these functions as the author suggests hedge funds do.

“3. Venture capitalists work with an entrepreneur to create and grow a capital asset – a company — from the ground up, over many years. This is exactly the type of behavior that long term capital gains tax policy is meant to encourage.

“It is unclear whether the author’s assertions included venture capital funds – but regardless, it is important for readers to understand the distinction.”