How ACA is Working to Protect Angels - Section 1202 Update


By: Pat Gouhin, Chief Executive Officer

As new developments unfold regarding President Biden's proposed tax increases, the Angel Capital Association, in collaboration with our partners at GrayRobinson, pledges to keep our members updated with information as it becomes available. ACA, along with our Public Policy team, is working diligently to continue to protect our members and angels in the startup ecosystem. 

The House Ways and Means Committee recently shared their draft of potential “pay-fors” for President Biden’s Build Back Better initiative (a.k.a. Reconciliation). The Committee has recommended eliminating the ability to claim the Section 1202 100% capital gains exemption to taxpayers who make over $400,000. This would raise approximately $5 Billion over 10 years to pay for parts of the Democrat’s domestic investments in healthcare, education, childcare and more.

ACA is working with the pro-business moderate New Democrat Coalition to raise our opposition to this provision. We are also working with a coalition of other innovation and entrepreneurship advocates to speak in a unified voice against this provision. 

It is unclear as to when this will go to the full House for a vote at this time. Currently Speaker Pelosi is trying to achieve consensus in her Caucus on the $3.5 Trillion reconciliation bill, but is also concurrently having discussions with the Senate on what a final product might look like. Senators Joe Manchin (D-WV) and Krysten Sinema (D-AZ) have expressed concern with the $3.5 Trillion price tag and will likely negotiate for a lower number. Senate Democrats need to remain unified to pass their provision with all 50 Democrats voting in favor and Vice President Harris breaking the tie.

In addition to lobbying the House Democratic leadership, we are engaging with Senate Finance Chairman Ron Wyden (D-OR) and Finance Committee members to express our opposition to the House’s provision.

To communicate our message most effectively with policy makers, ACA is requesting stories of how Section 1202 capital gain exemptions have helped ACA members reinvest money into more early stage startup companies.

Please share with us your stories of utilizing Section 1202 and how creating limitations on it will negatively impact the startup ecosystem.

We will continue to keep you up to date as the Build Back Better legislation moves forward as we stand up and fight for ACA members. 

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