New Senate Bill Supports Small Businesses and Angel Investors

ACA is pleased to join small business advocacy associations in supporting the new Small Business Tax Compliance Relief Act, sponsored by US Senator David Vitter, of Louisiana.  Sen. Vitter, who chairs the Small Business and Entrepreneurship Committee, aims to promote a fairer tax code for American small businesses and entrepreneurs and promoting US job growth.  The act includes 17 different tax and regulatory benefits for small businesses, covering health insurance, IRS regulations, and 409A deferred compensation packages, among other things.

ACA particularly likes the bill’s focus on improving the current rules for Qualified Small Business Stock (also known as “Section 1202”), which provides a better tax rate on investment gains.  The bill promotes a shorter holding period for the stock – 3 years instead of 5 – and a longer rollover period for gains, from 60 days to a full year.  Below is our letter of support for the bill.

July 9, 2015

The Honorable David Vitter
United States Senate
516 Hart Senate Office Building
Washington, DC 20510

Dear Chairman Vitter:

On behalf of the 13,000 members of the Angel Capital Association (ACA), the national professional association of accredited angel investors, I write in support of the Small Business Tax Compliance Relief Act¸ which would bring much needed reforms to Section 1202 of the United States Tax Code. Along with the members of ACA, I commend you for your leadership in promoting a fairer tax code for American small businesses and entrepreneurs and promoting US job growth.

As angel investors, the members of ACA, who are located in every state, are at the wellspring of capital formation and job creation in the United States. The current economy as well as the investment environment is much more dynamic than when section 1202 was first created with many companies going from start up to angel investment to private equity, then on to the public markets faster than ever. The Small Business Tax Compliance Relief Act would reduce the current five year holding period on qualified small business investments to three years. This reduction in the holding period is a welcome change for angel investors and will ensure that early stage angel investors don’t delay a company’s growth trajectory because of a potential tax liability. This change will allow any qualified investors who have held a stock for a minimum of two years to sell at a reduced capital gains rate, encouraging additional capital formation as angels re-invest their money in additional small businesses.

Another reflection in the change of the market is the time and detailed research it takes for qualified investors to roll any proceeds over into a new investment tax free. The current 60 day maximum is much too short for an individual or an angel group to properly research a new investment, ensure that the new investment is ready for a non-public offering, and deploy capital. Your bill’s recommended one year period for an individual or a group to do due diligence, invest smartly and deploy capital on a thoughtful and strategic basis will ensure that much needed financing is going to the most deserving startups.

Thank you for introducing the Small Business Tax Compliance and Relief Act and for your leadership in promoting smart tax reform which will lead to economic growth.  Your emphasis on job creation and capital formation is appreciated by the Angel Capital Association and we look forward to working with you to see the goals highlighted in this bill become US law.


Christopher Mirabile                                    Michael J Eckert                             Marianne Hudson
ACA Chair                                                       ACA Policy Chair                            Executive Director
Launchpad Venture Group                          NO/LA Angels                                Women’s Capital Connection