Editor’s note: The National Venture Capital Association is calling on Congress to be sure to remember startups when investigating business tax reform Here are the views of NVCA President and CEO Bobby Franklin:
“Today’s hearing [of the Senate Finance Committee] was an important one and we are supportive of congressional efforts to continue the discussion around business tax reform. However, because the success of innovative startups has become so important to economic growth, any discussion around tax reform must be expanded to consider ways that tax reform can encourage the creation of more U.S. companies as well as bolstering the competitiveness of larger firms.
“Young startups generally have to operate for years using investment capital to create and develop a novel product, making the investment environment absolutely critical to entrepreneurship. We have done a good job over the last four decades of developing tax policy that encourages patient, long-term investment—of which the country has benefited significantly.
“But 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, too often tax policy overlooks the entrepreneurial ecosystem.
“As lawmakers explore ways to reform the tax code, we would encourage them to not lose sight of startups and how the tax code can be reformed to encourage more entrepreneurial activity.
“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. We thank Chairman [Orin] Hatch for calling this important hearing and look forward to working with him and other committee members on these and other important reform measures.”