Public Policy Archives - National Venture Capital Association

NVCA Defends Startups in Letter to Treasury on Rule Change that Would Harm American Innovation

All Press Releases, Public Policy, Taxes November 12, 2019/by Devin Miller

FOR IMMEDIATE RELEASE
November 12, 2019

Contact: Cassie Ann Hodges
Phone: 202-864-5923
Email: chodges@nvca.org

WASHINGTON, DC – The National Venture Capital Association (NVCA) today sent a comment letter to the Department of the Treasury and the Internal Revenue Service (IRS) raising concerns about how a proposed rule change regarding the calculation of net operating loss (NOLs) limitations would harm startups and U.S. innovation.

The proposed rule change would reverse course on previously issued guidance that has worked well to smooth the tax implications of startups’ multi-year business cycles, and instead, impose rules that would hinder the ability of companies to match startup losses from R&D and similar activities with the future income generated by those activities, thereby depressing startup valuations and impeding new business formation and investment in innovation.

“At a time when the Department of the Treasury is focused on bolstering U.S. innovation, we are concerned that this proposed rule change will frustrate these efforts and unnecessarily reduce incentives to invest in entrepreneurship by reducing the valuations of innovative startups,” said Bobby Franklin, President and CEO of NVCA. “The proposed change to the calculation of NOLs will discourage the deployment of needed capital to promising startup businesses and critical U.S. technologies in the middle of a global innovation race.”

In addition to NVCA’s comments, NVCA also partnered with the Angel Capital Association (ACA), AdvaMed, and BIO on a separate letter arguing against the proposed NOL rule change.

Read NVCA’s Letter here.

Read the coalition letter here.

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The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade

NVCA Recommends Key Changes to CFIUS Rules that Impact Investment into U.S. Startups

All Press Releases, Public Policy October 17, 2019/by Devin Miller

WASHINGTON, DC – The National Venture Capital Association (NVCA) today filed its formal comments regarding the proposed final rules to implement the Foreign Investment Risk Review Modernization Act (FIRRMA), which significantly expanded the authority of the Committee on Foreign Investment in the United States (CFIUS). CFIUS’s authorities granted by FIRRMA have impacted U.S. startups raising capital and will continue to do so. NVCA’s comments address 11 issues in the proposed rules impacting the venture and startup ecosystem and make recommendations on how these issues can be addressed in the final rules so that disruption to the U.S. venture capital and startup ecosystem is minimized.

“Establishing clear rules of the road, removing points of confusion, and creating a more focused version of the proposed rules is in all parties’ interest. If too many nuisance cases are filed, CFIUS stands less chance of seeing those that are of the most importance,” NVCA said in its formal comments. “By contrast, focusing on the areas of greatest interest – on more specific lists of technologies, of purchasers, of nations of interest – will allow CFIUS to better protect national security. At the same time, cleaner, clearer, narrower final rules will reduce the economic headwinds that over-regulation can create. NVCA looks forward to continuing to engage with CFIUS in order to explain potential impacts on American innovation and mitigate any adverse economic and national security effects that may arise as a result of the final rules.”

NVCA makes recommendations in its comments on 11 issues in the proposed final CFIUS rules to minimize harm to the U.S. innovation ecosystem. NVCA recommends that CFIUS should:

Clarify the “Principal Place of Business” Test for Funds to Exclude Nuisance Cases
Provide Additional Examples for the Definition of “Foreign Person” to Exclude Nuisance Cases
Improve the Exceptions Process for Covered Investments
Implement the Waiver Provision for Mandatory Filings for Investors from Selected Foreign Countries
Reconsider the Pilot Program “Critical Technology” Filing Requirement, and, at a Minimum, Rescope that Requirement
Clarify that Foreign Limited Partner Direct Investments do not Result in CFIUS Jurisdiction over Investments by Funds in Which Those Limited Partners Passively Participate
Expand Upon the Definition of “Material Nonpublic Technical Information”
Clarify What Types of Changes in Control Trigger its Jurisdiction Over a New Covered Investment (and Therefore, in Some Cases, a Mandatory Filing)
Consider a Broader Definition of Passivity to Provide Investors with Certainty
Consider Narrowing the Scope of “Sensitive Personal Data”
Maintain its Traditional Jurisdiction with Respect to U.S. Businesses

Download NVCA’s CFIUS Comments.

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The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about the NVCA, please visit www.nvca.org.

NVCA Board Member Testifies Before Senate Panel on Antitrust and Digital Platforms

All Press Releases, Capital Formation & Regulation, Public Policy, Technology September 24, 2019/by Devin Miller

WASHINGTON, DC – At a Senate hearing today, National Venture Capital Association (NVCA) Board Member Patricia Nakache, General Partner at Trinity Ventures, testified on the on competition in digital technology markets and how venture capitalists think about acquisitions of early-stage companies by larger competitors. Testifying before the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Protection at a hearing entitled, “Competition in Digital Technology Markets: Examining Acquisitions of Nascent or Potential Competitors by Digital Platforms,” Nakache shared with lawmakers the considerations of venture capitalists as they invest and partner with entrepreneurs that are taking on large companies. She also outlined the diverse views the VC industry has regarding using antitrust law against large digital platforms and made recommendations as policymakers consider action in this area. Read more

Ten VCs Join NVCA Board and Jan Garfinkle Appointed Chair at VCs-to-DC

All Press Releases, Public Policy June 6, 2019/by actualize

WASHINGTON, DC – The National Venture Capital Association (NVCA) announced that Jan Garfinkle, Founder & Managing Partner at Arboretum Ventures, will serve as the 2019-2020 Chair of the NVCA Board of Directors. Her appointment was made official at NVCA’s VCs-to-DC event in Washington, D.C., which doubles as the NVCA Annual Meeting. Read more

Emerging Technology Definition Must Protect American Innovation

All Press Releases, Public Policy January 11, 2019/by actualize

WASHINGTON, DC – The National Venture Capital Association (NVCA) recently made formal recommendations in the Commerce Department’s rulemaking process to define so-called “emerging technologies” that will be subject to export controls. These newly defined emerging technologies will also feed directly into the Foreign Investment Risk Review Modernization Act (FIRRMA) process, and certain investments into these types of companies may trigger a CFIUS filing. In announcing the comment period, Commerce asked for feedback on 14 categories that includes AI/machine learning, 3D printing, biotechnology, and several other technology areas that are major focuses of U.S. startups and venture investment. Read more

NVCA Supported NOL Reform Makes Progress Towards Passage

All Press Releases, Public Policy, Taxes November 28, 2018/by actualize

WASHINGTON, DC – The National Venture Capital Association (NVCA) was delighted to see continued progress on net operating loss (NOL) reform with the inclusion of the “American Innovation Act of 2018” in the end-of-year tax package, which will be voted on in the House of Representatives tomorrow. The bill includes a proposal sponsored by Rep. Erik Paulsen (R-MN) to protect the NOLs of startups by allowing them to carry forward their losses and R&D tax credits accrued in the first three years of the start of a company’s active trade or business without regard to Section 382 of the tax code, which currently can create an unintentional tax penalty for startups. Read more

NVCA Cheers Prioritization of Startup Loss Carryforward Rule Reforms

Public Policy, Taxes September 12, 2018/by actualize

WASHINGTON, DC – The National Venture Capital Association (NVCA) was pleased to see that the “American Innovation Act of 2018” includes a proposal to protect the net operating losses (NOLs) of startups. The proposal would allow startups to carry forward their losses and R&D tax credits accrued in the company’s first three years of existence without regard to Section 382 of the tax code, which currently can create an unintentional tax penalty for startups. Startups often accumulate NOLs when using investment capital to try and build a successful company. These NOLs most often are related to research and development and hiring, activities that public policy separately seeks to encourage. However, the Section 382 rules often do not allow startups to carry forward their NOLs, essentially penalizing startups for investing in innovation since they serve as assets on a company’s balance sheet. Read more

NVCA Cheers House Passage of JOBS and Investor Confidence Act of 2018

Capital Formation & Regulation, Public Policy July 17, 2018/by actualize

WASHINGTON, DC – The National Venture Capital Association (NVCA) applauds today’s passage of the JOBS and Investor Confidence Act of 2018 in the U.S. House of Representatives by an overwhelming bipartisan vote of 406-4. The bill includes a number of provisions that will support capital formation for U.S. growth companies. These pro-innovation provisions include relief for many venture capital firms from having to become Registered Investment Advisors (RIAs), a designation that was not intended for VC firms and which adds a number of costs and challenges for VC firms. Even firms that do not have to register often need to manage their portfolio and limit or refrain from certain investments to avoid the regulatory morass of registration. Read more

NVCA Defends International Entrepreneur Rule in Comments to DHS

Immigration, Public Policy June 28, 2018/by actualize

WASHINGTON, DC – The National Venture Capital Association (NVCA) filed comments today to the Department of Homeland Security (DHS) arguing against the department’s proposed rescission of the International Entrepreneur Rule (IER), which would allow for talented immigrant entrepreneurs to remain in the United States to build and scale their startups. NVCA argues in its comments that rescinding the IER program would prevent the U.S. from realizing the substantial economic and security benefits that locating new startup companies in the U.S. would provide.

“NVCA is proud to once again lead the charge to support immigrant entrepreneurs,” said Bobby Franklin, President and CEO of NVCA. “Our comments in support of the International Entrepreneur Rule reflect the incredible contributions of foreign-born entrepreneurs and how they are working in partnership with venture capitalists to solve the world’s most challenging problems, whether in technology, healthcare, science, or many other areas. In addition, our comments demonstrate that the administration relies on unsupported assertions and arguments in justifying removal of the International Entrepreneur Rule.” Read more

New Volcker Rule Proposal Asks Critical Question on Bank Investment into VC

All Press Releases, Capital Formation & Regulation, Public Policy May 30, 2018/by actualize

WASHINGTON, DC – The National Venture Capital Association (NVCA) was pleased to see that today’s proposal from the Federal Reserve to simplify the Volcker Rule includes questions on whether the rule’s exclusion of banks from investing into U.S. venture capital funds should be revised. Currently, the Volcker Rule prohibits U.S. financial institutions from investing into venture capital funds as limited partners. This has had a disproportionate impact on cities and regions with emerging entrepreneurial ecosystems—areas outside of Silicon Valley and other traditional technology centers. Read more