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Tax Changes - Implications For Venture Capital

Asher Bearman of DLA Piper


The National Venture Capital Association (NVCA) had a good post about the implications of the new tax bill significant to the venture capital community. Significantly, they note that this bill did not address any changes to the tax rate for "carried interest", but they do "fully expect" carried interest tax rate increases to remain a topic of discussion as part of the larger pending tax reform discussion, although they project that discussion to be delayed until the second half of 2013.

We've written a number of posts about the bill already, including this summary of the bill and a qualified business stock update.

Quoting from the NVCA Article:

For the venture industry itself, the bill is generally good news, albeit temporary in nature. As expected, the final legislation sent to the President returns the capital gains rate to 20% for individuals with income above $400,000 or families with income above $450,000. With the addition of the 3.8% capital gains tax mandated under the Affordable Care Act, the capital gains tax rate in 2013 will be 23.8% for most VCs. The Administration had pushed aggressively for a higher cap gains rate, but was unsuccessful in that effort. Also significantly, the measure does not include any change to the taxation of carried interest. As we move forward into overall tax reform, we would therefore not anticipate any further increase in the capital gains rate, but we fully expect to see carried interest as a part of the discussion.

The Venture Alley

The Venture Alley is a blog about business and legal issues important to entrepreneurs, startups, venture capitalists and angel investors. The Venture Alley is edited by Asher Bearman, Trent Dykes and Megan Muir, corporate and securities lawyers at DLA Piper.

Contributing authors to The Venture Alley include corporate and securities lawyers from the Seattle office of DLA Piper, which Chambers USA describes as “[a] team that exceeds all expectations” (Chambers USA: America's Leading Lawyers for Business 2010), as well as attorneys from other DLA Piper offices and practice areas. In addition to representing entrepreneurs, startups, venture capitalists and angel investors, DLA Piper’s lawyers also assist some of the nation’s top companies with their SEC reporting, public offerings, M&A, cross-border transactions and general commercial and securities litigation.

Material in this work is for general educational purposes only, and should not be construed as legal advice or legal opinion on any specific facts or circumstances. For legal advice, please consult your personal lawyer or other appropriate professional. Reproduced with permission from DLA Piper. This work reflects the law at the time of writing.