Venture capitalist firms urge the Securities and Exchange Commission (SEC) to give relief to start-up companies from post-Enron corporate-governance laws. VC firms believe the SEC is prolonging the worst initial public offering slump in decades by maintaining these laws. The VC firms want the SEC to review regulations, such as pre-IPO financial reporting requirements, rules that keep investment banking separate from stock research within brokerages, and the Sarbanes-Oxley Act.
The industry is also asking for tax relief for IPO investors. The VC firms believe that venture-backed stock offerings have helped create 12 million U.S. jobs. 10 percent capital gains tax rate for IPO investors who hold shares for at least two years was a proposed idea from a VC firm. This is compared with the usual 15 percent tax on capital gains.They claim that without IPOs, there is no job growth which will make the recession deeper.
VC firms are fighting to keep a tax break that President Barack Obama has proposed eliminating. The share of the profits that venture capitalists make investing clients’ money is currently taxed at the same rate as capital gains, rather than the higher level for ordinary income.
Written by Shosh Pincus
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