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"Fiscal Cliff" Act Supports Startup Investment

Exemption of Capital Gains Tax Championed by Angel Capital Association
Expected to Spur Investments, Helping Local Economies

Extension of the 100 percent exemption on capital gains for Qualified Small Business Stock (QSBS) investments included in legislation to address the fiscal cliff last week will improve opportunities for high-growth startups to attract capital, according to the Angel Capital Association (ACA), which championed the provision through its public policy efforts. The American Taxpayer Relief Act provides the 100% exemption for calendar years 2013 and 2012, retroactively.

"There is little question that new and innovative startups drive economic growth," said Dan Rosen, Chair of the ACA Public Policy Committee. "This extension demonstrates that Congress and the White House understand this linkage. We at ACA are pleased that we have helped our representatives understand the importance of high-growth startups to the US economy. We will now work to make this measure permanent."

"ACA believes the best way to ensure a strong flow of angel capital into innovative small businesses across our economy is to provide appropriate incentives that encourage accredited investors to risk their capital to support high potential startups," said Marianne Hudson, Executive Director of ACA, the North American trade association of angel groups and private investors that invest in high growth, early-stage ventures.

"The 100 percent exemption for QSBS became an important pillar of angel investing when it was enacted in 2010 and we believe its reinstatement will help ensure private capital flow to the innovation economy," Hudson said. "ACA worked closely with legislators on both sides of the aisle and in both houses of Congress over the past months, and we are very gratified that the value of this small but important provision was recognized and retained in the American Taxpayer Relief Act."

"This exemption is an important consideration for our members as we consider an investment," said Keith Brown, Chairman of Montana’s Frontier Angel Fund, LLC. "It helps offset some of the risk that individual investors take in supporting these young businesses that are actively creating new jobs and helping the economy grow."

"Angel investors" are private individuals who fund early stage, high growth startups that are the well-spring of the innovation economy. Individuals who invest their own capital in these high-risk, illiquid securities must meet accredited investor qualifications required by the Securities and Exchange Commission (http://www.sec.gov/answers/accred.htm).

The American Taxpayer Relief Act includes multiple provisions including changes in the income tax and capital gains tax rates for families with incomes above $450,000. ACA recommends that investors undertake a full review of relevant tax legislation with their own financial and/or legal counsel.

About the Angel Capital Association: ACA is the North American trade association of angel groups and private investors that invest in high growth, early-stage ventures. ACA provides professional development, industry voice, public policy advocacy and an array of benefits and resources to its membership of nearly 200 angel groups and more than 8,000 individual accredited investors. http://www.angelcapitalassociation.org
@ACAangelcapital

Frontier Angel Fund, LLC is Montana’s first and only angel investor fund. Made up of 33 Accredited Investors, the fund has been actively investing in Montana and the Inland Pacific Northwest since 2006. http://www.frontierangels.com.

For more information:
Marianne Hudson
913-894-4700 x1
[email protected]

Liz Marchi,
Fund Coordinator, Frontier Angel Fund, LLC
[email protected]
406-883-4044

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