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15

Feb

2012

Carried Interest Remains in Limelight PDF Print E-mail

Jennifer Dowling

Written by Jennifer Connell Dowling   
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On Monday, February 13th, the President released the Administration’s Fiscal Year 2013 federal budget, and while there is no expectation that this budget will be enacted, it serves as a marker for lawmakers as they devise their own funding initiatives.  Not surprisingly, a change to the tax treatment of carried interest was included once again in the budget as it has been since Obama entered the Oval Office.  We continue to be disappointed that the Obama administration ignores the fact that implementing policies detrimental to the venture industry runs counter to his stated support for the venture-backed start-up companies that have been and will continue to be one of the few sources of U.S. job creation and technological innovation.

Adding fuel to the fire, Congressman Sandy Levin (D-MI) also introduced specific carried interest legislation again this week.  Between that, the President’s budget, and the laser focus on the issue generated by Presidential candidate Mitt Romney’s tax returns, we expect carried interest to remain on the front lines of political rhetoric for the rest of the year.

If and when full-scale tax reform gains serious traction, the discussion could very well shift, as we’ve noted publicly, to capital gains more broadly (i.e. should the tax code continue to provide a preferential rate for investment income) and whether partnership tax structures should be maintained.  We will remain vigilant on all of these topics as the political cycle unfolds.

 

07

Feb

2012

NVCA Submits Comment Letter on Volcker Rule PDF Print E-mail

Jennifer Dowling

Written by Jennifer Connell Dowling   
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As many are aware, the Volcker Rule is a provision within the Dodd-Frank legislation that prohibits banks from owning, sponsoring or having certain relationships with private equity or hedge funds.  Although Congress specifically differentiated venture capital from private equity in the Dodd-Frank provisions relating to registration of investment advisers, the language in this provision remained broad.  Despite indications in the final days of debate on the legislation that Members of Congress did not intend to apply the Volcker Rule to venture capital, the final legislative language left VC status unclear. 

This provision is a small component of a very complicated rule.  Yet, it is important to clarify this language so that there is consistency among regulations.  The fact that venture capital is not a systemic risk to the financial system should apply to the Volcker Rule just as it applies to SEC registration.

As an interagency group comprised of Department of Treasury, the Federal Reserve, the FDIC, and the SEC have been finalizing implementation, they have solicited comments regarding many aspects of the Volcker Rule.  In the latest request, they have asked for comments on whether venture capital should be exempted from the provision, and if so, whether the final SEC definition of venture should be used to do so.  This week, NVCA submitted a comment letter supporting both the exemption and the use of the SEC definition.

We encourage those members who would be impacted to weigh in with the agencies by Monday, February 13th.  The proposed rules have been subject to extensive public comment, and there is no clear schedule for adoption of final rules.  We will continue to monitor the situation.

 

19

Jan

2012

NVCA Blacks Out Website in Opposition to SOPA and PIPA PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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Yesterday, with the encouragement from our chairman Paul Maeder, the NVCA joined the national website blackout in opposition to the Stop On-line Piracy Act (SOPA) and Protect IP Act (PIPA) now being considered in the U.S. House of Representatives and Senate respectively. As many know, the legislation aims to combat online piracy but, as currently written, will have severe consequences for the Internet and innovation. 

As Paul has expressed, "Protecting copyrighted material is a worthy and important goal.  In my opinion, SOPA and PIPA have serious flaws.  While attempting to solve the piracy problem for one segment, these bills create unsustainable burdens for an equally important segment of the economy – the technology sector.  If enacted, these measures might temporarily dent piracy, but at a terrible and unnecessary economic and social price."

In the last several weeks, a number of Senators and Representatives joined those already voicing their opposition to SOPA and PIPA.  Joining Senator Ron Wyden (D-OR) and others in opposition to the bill this week have been Senators Scott Brown (R-MA), Mark Udall (D-CO), and Mark Kirk (R-IL). On the House side, Representatives Jared Polis (D-CO), Zoe Lofgren (D-CA), Darrell Issa (D-CA) and others were joined in opposition by two original cosponsors of SOPA, Reps. Ben Quayle (R-AZ.) and Lee Terry (R-NE).

Additionally, the White House has also weighed in on SOPA and PIPA issuing a blog statement saying that the President believes that online piracy is a problem but that PIPA and SOPA go too far. The statement was authored by Chief Technology Officer Aneesh Chopra, OMB Intellectual Property Enforcement Coordinator Victoria Espinel and Howard Schmidt, special assistant to the president and cyber security coordinator for National Security Staff. They call on opponents of the legislation to find solutions that both sides can agree on.

The momentum of the legislation is clearly slowing and we are optimistic that Congress will rethink these bills. However, political momentum can shift easily so continuing our efforts is important.   The NVCA public policy team has been meeting with members of the House and Senate to share our concerns and urge political leaders to design and enact thoughtful legislation that guarantees the three goals of open information, frictionless commerce, and rights protection.  We have also convened a subgroup of NVCA members to work more closely on this issue and try to find solutions to the most problematic sections of the bills.  We will keep you apprised here at NVCA as developments occur.

 

13

Jan

2012

NVCA Will Accurately Define Venture Capital in This Election Year PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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As the race for the Republican Presidential nomination moves into high gear, we have all seen both the media and the competing campaigns turning their focus to Mitt Romney and the time he spent at Bain Capital. Unfortunately, much of the coverage has created significant confusion regarding the difference between venture capital and private equity. While NVCA does not endorse presidential candidates, and we have not and will not comment on Mr. Romney or any other presidential candidate's credentials, we must and will engage the media in the discussion about what venture capital is and is not.

Of particular importance is accurately communicating venture capital's unwavering commitment to job creation and innovation - and the fact that we work with entrepreneurs to create and grow new companies, characteristics that distinguish our asset class from all others. To that end, you can expect to see NVCA focusing in the coming weeks and months on educating the press, campaign staff, and Capitol Hill on these notable differences and encouraging our members to take every opportunity to talk about what they do each day to help grow their promising portfolio companies. 

 

20

Dec

2011

Growing Support for Legal Immigration Reform PDF Print E-mail

Emily Baker

Written by Emily Baker   
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Comprehensive immigration reform may be bogged down in election year politics, but the issue of high skilled immigration is making some headway in Congress.  In late November, the House of Representatives passed a bill (by an overwhelming margin of 389-15) sponsored by Rep. Jason Chaffetz (R-UT) entitled the Fairness for High-Skilled Immigrants Act (HR 3012). The legislation would eliminate the per country numerical limitation for employment-based Visas and increase the per country numerical limitation for family-based immigrants from 7% to 15% of the total number of family-sponsored visas. The family-based Visa provision is important because often an entrepreneur is able to get a Visa, but it is difficult for his or her family to come to the U.S., so this measure would loosen the ability for that family to relocate together.  The measure is awaiting action in the Senate.

In other immigration news, Reps. Adam Schiff (D-CA) and Charlie Bass (R-NH) recently introduced legislation that would help foreign born students with STEM degrees from U.S. universities to remain here to start a business.  Their bill, the INVEST Act (HR 3692), would create as new Visa category that would grant permanent residency to an immigrant entrepreneur who starts a new business, creates two new jobs or invests $200,000 after two years; and creates five jobs or invests $500,000 in the business within five years. According to Reps. Schiff and Bass:

“The INVEST Act will allow highly skilled entrepreneurs the opportunity to build the next great company and to do it in America. Our universities are educating the next generation of Steve Jobs – we want to make sure they build the next Apple in the United States and not overseas.”

Lastly, a new report released by the National Foundation for American Policy (NAFP) today finds that immigrant founders continue to play a key role in spurring venture-backed breakthrough companies.  Stuart Anderson of the NAFP, and the author of NVCA’s 2006 report, American Made, makes the strong case  for legal immigration reform in this new report as it finds that immigrants are serving as C-level and technical product development positions at the majority of America’s most promising venture-backed companies.  This new report confirms the findings that NVCA made five years ago and perhaps makes it even more imperative that the US put out the “Welcome” mat for these entrepreneurs who help create jobs and drive our economy. 
 

19

Dec

2011

NVCA Submits Comments to FAF on Private Company Initiative PDF Print E-mail

John Taylor

Written by John Taylor   
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NVCA has issued its comment letter to the Financial Accounting Foundation on FAF’s draft plan to make private company financial reporting standards more relevant and useful. NVCA supports the overall plan and makes suggestions for improvements in governance, accountability, and structure. The draft plan issued in early October, is in response to the recommendations of the Blue Ribbon Panel (BRP) created by FAF over a year ago.  The BRP made a number of recommendations for bringing more focused attention to the specific needs of private companies which are often quite different from those of the stakeholders in public companies.

NVCA believes that the current one-size-fits-all approach to accounting principles, standards, and disclosures results in significantly added costs and efforts for its member firms and the high-growth, high-promise companies they invest in. Much of the resulting required reporting, established partly for public company investors and creditors, is irrelevant to private company stakeholders.

NVCA and its members plan to speak out on the plan at the roundtables scheduled by FAF.  We look forward to working with FAF leadership as it finalizes the structure and format for the new group.

The Financial Accounting Foundation is the parent organization of the Financial Accounting Standards Board (FASB) which is the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Those standards are officially recognized as authoritative by the US Securities and Exchange Commission (SEC).  For more information, please contact me at jstaylor (at) nvca (dot) org.

 

19

Dec

2011

Online Piracy Bill Stalls in House PDF Print E-mail

Emily Baker

Written by Emily Baker   
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Last week, the House Judiciary Committee continued to push the controversial Stop Online Piracy Act (SOPA) legislation which despite having the support of the chairman and ranking member of the committee as cosponsors, remains a lightning rod for the rank and file members of Congress.  The SOPA bill is aimed at shutting down foreign “rogue” websites that engage in piracy and counterfeiting, but the legislation would have far reaching negative implications for investors, entrepreneurs and advertisers and payment providers on the Internet. While the goal of the legislation is laudable, the end result of the legislation as currently written could have a chilling impact on innovation.

The committee held a hearing two weeks ago at which only one witness representing the tech community was invited to testify and present their concerns about the legislation.  This issue has garnered tremendous media attention and has both sides, Hollywood/content providers and the tech community, ready for a pitched battle. Chairman Lamar Smith (R-TX) and ranking member John Conyers (D-MI) publicly stated their desire to get a bill passed by the full House by the end of the year and to make that deadline, they scheduled a markup of the bill at which more than 60 amendments were filed.

The markup got off to a slow start when the opposing side objected to the short notice that was given to review changes to the bill and they requested that the bill be read out loud in its entirety by the committee clerk, a process that took hours to complete. Then, opponents of the legislation, like Reps. Zoe Lofgren (D-CA) and Jared Polis (D-CO) pointed out the many flaws in the legislation and they quoted letters and statements from groups opposed to the bill.  Even Republicans on the committee pointed out that there is no reason to rush the legislation through and they expressed a desire to hear from more tech experts about how the bill will change Internet search functions. 

NVCA believes the slowing of the legislative process is a positive development and will allow for critical concerns to be raised and addressed.  Our desire for a more thoughtful process was demonstrated in the letter we submitted last week alongside other tech groups such as TechNet, CEA, Information Technology Industry Council, Silicon Valley Leadership Group and TechAmerica, where we asked policy makers to proceed more deliberately with this complex and potentially very harmful legislation. We also asked them to bring together all the stakeholders so that we can all work collaboratively to end online piracy while not stifling innovation. 

NVCA will stay abreast of this legislation and keep our members informed about the status of the House and Senate bills. We appreciate the outreach that we have received so far from our members and continue to make our concerns about the bill known.

 
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