By: Marianne Hudson, ACA Executive Director

New ACA Chair Linda Smith meets with Rep. Ruben Kihuen (D-NV) on June 28, 2017

I am pleased to welcome Linda Smith as she begins to serve as Chair of ACA’s 18-member Board of Directors on July 1.  Linda has served as ACA Vice Chair for two years, during which she has been instrumental in updating ACA’s strategy growth, shaping the policies that impact startup communities and angel investors, and meeting with Congressional representatives regarding important policy issues for angels.

By David Verrill, Chair of ACA’s Public Policy Committee

Ten days ago, I took a trip to Washington, DC with ACA executive director Marianne Hudson and our government affairs team of Chris McCannell and Greg Mesack from Eris Group.  It was an interesting three days, with a combination of planning our policy work for the year, meeting with other associations with overlapping interests, and ten meetings on Capitol Hill.  This was the week after the inauguration of President Trump, and you could see a lot of change in our nation’s capital.  Here is what I learned:

Comprehensive Tax Reform

Comprehensive tax reform is coming (after Congress deals with the repeal and replacement of Obamacare), with the goal of having it done by August 1.  Most believe that the House will follow blueprints by Paul Ryan and former Ways & Means chair Dave Camp as the basis to build on, with the following features:

By: Angela Jackson is an ACA Board Member and Chairs the “Grassroots Group” for ACA members interested in interacting with Members of Congress.  Want to join?  Shoot Angela an email.

Exciting things are happening in Washington, DC relative to advancing the ACA legislative agenda - and we're requesting your immediate help.

Call to Action - by Monday January 9!

ACA just got word that the House of Representatives plans to vote on the HALOS Act next week.  HALOS (Helping Angels Lead Our Startups) exempts demo days from general solicitation rules, meaning that companies that participate in any type of demo day would no longer need to worry about taking extra steps to verify investors are accredited – unless they are going the solicitation 506(c) way.  And angels who prefer to invest in private deals would have better assurances that companies had not tripped the general solicitation trigger.  The bill, HR 79, has great bi-partisan sponsors:  leads Rep. Steve Chabot (R-OH) and Kyrsten Sinema (D-AZ), and co-sponsors Andy Barr (R-KY), Carlos Curbelo (R-FL), John Delaney (D-MD), Randy Hultgren (R-IL), Jared Polis (D-CO), Pete Sessions (R-TX), and Ann Wagner (R-MO).

By: Marianne Hudson, ACA Executive Director

The Angel Capital Association has been very active in educating policy makers in Washington, DC for six years, and I am proud to say that this Fall ACA has ramped up our activity and effectiveness even more.  In case you missed it:  here’s what the association has done to advocate for startups and angels in the last two months, and providing insights to our members:

• Wrote a letter to the Trump transition team – ACA’s memo highlights the importance of new businesses to job creation in the US and the need to promote policies that free up capital and minimize regulatory burdens.  The focus is on what President Elect Trump can do immediately, during his first 100 days, and also in his first year in office on everything from appointing SEC commissioners who understand early-stage investing to keeping the current accredited investor definition the same to tax policy that catalyzes investment in high growth, innovative startups.

By David Verrill, Managing Director of Hub Investment Group 

Many angels have noticed the unique capabilities of entrepreneurs from outside the US to build great companies. Now, finally, so has the American federal government (noting that our colleague Canadians have been all over this for some time).  The Department of Homeland Security released rules that would allow more foreign born entrepreneurs to stay in the US longer to grow their companies.  One of the main requirements is for angels or VCs to invest in their companies.  The rules will become final after a review of comments to the first public draft. 

By Chris McCannell, Partner at Eris Group

Editor’s Note:  ACA wants to share with our members our progress in Washington.  It’s an important use of member dues, and we believe it is worth every penny.  We work with Eris Group on American public policy issues, and have had great results in the last year – from a 100% exemption on investment gains to House passage of bills that would ensure that demo days are not included in general solicitation and increasing the number of investors in an angel fund or syndicate from 99 to 249.  With Eris Group, ACA has also helped move the conversation about the definition of accredited investor to a more positive one (in angels’ view), and we are now regularly sought out by Members of Congress and other organizations for input and support of legislation and policy issues.

ACA learned in 2010 that Congress and regulators could have a huge impact on angel investors and the startups angels support.  ACA was able to ensure Dodd-Frank didn’t increase the financial thresholds for the accredited investor definition then, but the association learned it needed help from DC professionals to protect angels through that experience.

By: Marianne Hudson, ACA Executive Director

Victory! With lots of work by ACA and many leaders, the House passed the HALOS Act, which would ensure companies presenting in demo days would not have tripped the general solicitation trigger and therefore be required to take extra measures to verify all of their investors are accredited.  This is something the entire startup ecosystem – investors, entrepreneurs, accelerators, incubators, universities and more - cares about.  We will now concentrate our efforts on the Senate to make the bill a reality. The bill was approved by a 325-89 vote, meaning it was relatively bi-partisan.

By: Marianne Hudson, ACA Executive Director

Many angels, startups, VCs and the startup ecosystem have asked for more clarity about demo days for a couple years now.  These events seem to meet the definition of “general solicitation” and most investors don’t want to invest in companies that publicly advertise, but they have seen demo days as an important part of our world for decades.  The confusion may get clarity because of the work of a bi-partisan group of Members of Congress.

The Angel Capital Association supports HR 4498, the Helping Angels Lead Our Startups Act (HALOS Act) and want to thank Reps. Chabot, Sinema, Hurt and Takai for introducing this bi-partisan bill last week.  We believe the HALOS Act helps more job-creating startup companies raise the funding they need because it removes a barrier to funding.  There has already been discussed in a hearing of the House Financial Services and could be on a positive track.  A similar bill is also in the Senate, with bi-partisan sponsors as well.)

By: Marianne Hudson, ACA Executive Director

December 18 was a very big day for angel investors.  Not only did the SEC put out a staff report that recommends tweaks to the accredited investor definition, but Congress passed a big tax act that makes permanent the 100% exemption of capital gains.  Here’s what you need to know in connected blog posts:

Tax Benefits - The holiday party starts early with a gift from Congress

The House and Senate passed the PATH Act (Protecting Americans from Tax Hikes) which included the Angel Capital Association’s top tax priority, extension of Section 1202 of the US Tax Code which allows a 100% exclusion of gains on Qualified Small Business Stock has been made permanent. ACA will continue to support reform of this tax exemption, such as reducing the current minimum five year holding period, in future tax reform. ACA commends our champions who have promoted a tax code that rewards innovation and job creation: Senator Ron Wyden (D-OR), Senator Maria Cantwell (D-WA), Congresswoman Lynn Jenkins (R-KS) and Congressman Ron Kind (D-WI).  Thanks also to our government affairs leaders, Chris McCannell and Joel Riethmiller.

By: Marianne Hudson, ACA Executive Director

December 18 was a very big day for angel investors.  Not only did the SEC put out a staff report that recommends tweaks to the accredited investor definition, but Congress passed a big tax act that makes permanent the 100% exemption of capital gains.  Here’s what you need to know in connected blog posts:

Accredited Investor Definition – A mix of gifts and lumps of coal in our stockings

Not far from the US Capitol Building, the SEC quietly released a report from its staff on the Accredited Investor definition on the same day.  As many angels will remember, the SEC is required to study the definition by Congress in the Dodd-Frank Act.  Time will tell if this staff report fully addresses the requirement or if it informs future rulemaking by SEC Commissioners.

To ACA’s delight, some of the recommendations in the report actually match what our leadership has suggested in multiple meetings and letters, such as allowing people who are sophisticated but don’t meet financial thresholds to be accredited.  As in many things, however, there are also some recommendations in the report that are different than most angels would like.  All in all, the SEC staff’s report could have been much worse – for instance it does not include increasing financial thresholds for income to $450,000 and wealth to $2.5 million as some organizations advocated.