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President Obama Signs a Temporary Bill to Encourage More Angel Investing

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Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#21

Post by anamax »

lukifer wrote: post #14
fleitz wrote: post #11

What a weird bill, it only affects a 4 month period, what is so special about Sept 27, 2010 to Jan 1, 2011?

One hypothesis might be that a more long-lasting bill is being drafted, and this an interim solution.

> One hypothesis might be that a more long-lasting bill is being drafted, and this an interim solution.

A more realistic hypothesis is that they've figured out that a long term approach is dumb. A bill that has to be renewed every six months gives folks two reasons a year to "help" the legislators.

Remember, "reform" means "we need to get more money from supporters".

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#23

Post by jbooth »

anamax wrote: post #21
lukifer wrote: post #14

Earlier quoted context omitted.

One hypothesis might be that a more long-lasting bill is being drafted, and this an interim solution.

> One hypothesis might be that a more long-lasting bill is being drafted, and this an interim solution. A more realistic hypothesis is that they've figured out that a long term approach is dumb. A bill that has to be renewed every six months gives folks two reasons a year to "help" the legislators. Remember, "reform" means "we need to get more money from supporters".

That's 2009 thinking. You know how much work it is to round up 1,000 $2,300 donations?

Just get one guy to write a $2 million dollar check to the Chamber of Commerce and you're good to go. After all, it's freedom of speech, according to the Citizens United ruling.

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#24

Post by _pius »

anamax wrote: post #20
danielayele wrote: post #10

Earlier quoted context omitted.

angels usually invest as individuals or via LLCs and super-angels and VCs are usually structured as partnerships so the exclusion won't apply to most active early stage investors.

> angels usually invest as individuals or via LLCs LLCs are corporations. I wonder what the bill actually says.

LLCs are not corporations, at least not in the United States.

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#25

Post by Bricejm »

fleitz wrote: post #11

What a weird bill, it only affects a 4 month period, what is so special about Sept 27, 2010 to Jan 1, 2011?

The Bush tax cuts expire at the end of 2010. This is just temporary until the new adiministration can pass their tax legislation which will probably include something similar to this.

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#26

Post by jbl »

ojbyrne wrote: post #22

"The investor must hold the stock for more than five years" and you must realize the gain before Jan 1, 2011. How does that encourage new investment?

My reading is that one needs only to purchase the stock before Jan 1, 2011 and then hold it for at least five years. Gains from sale of the stock after that would then be taxed according to this new bill.

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#27

Post by lzw »

A very obscure, complicated and short term bill that lets democrat congressmen go back to their districts and run political advertisements that claim they "passed legislation to help america's small businesses", etc.

Minimal effect, and on top of it, it is overwhelmed by bills already signed that do significant damage to the economy. For instance, the bill that massively increases the size of government, putting a permanent burden in taxation or inflation on the economy that Obama claims will "Stimulate" it. Making things more expensive and preventing businesses from expanding is not stimulative. Adding more workers to the government payroll is a drain.

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#28

Post by rdl »

ojbyrne wrote: post #22

"The investor must hold the stock for more than five years" and you must realize the gain before Jan 1, 2011. How does that encourage new investment?

The stock must be acquired between 27 SEP 2010 and 1 JAN 2011.

You then hold it for at least 5 years, and subject to the other provisions, it's exempt from federal tax (especially AMT!) when exercised.

So, this is a bet on LT capital gains rates circa 2016+. But, a bet that doesn't particularly cost anything, assuming you were going to start the business in the next 3 months anyway.

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#29

Post by ojbyrne »

jbl wrote: post #26
ojbyrne wrote: post #22

"The investor must hold the stock for more than five years" and you must realize the gain before Jan 1, 2011. How does that encourage new investment?

My reading is that one needs only to purchase the stock before Jan 1, 2011 and then hold it for at least five years. Gains from sale of the stock after that would then be taxed according to this new bill.

Ah, I guess it could be read that way:

"which includes a temporary exclusion for 100% of the gain recognized by non-corporate investors from the sale of qualified small business stock (“QSBS”) acquired after September 27, 2010 and before January 1, 2011"

so the dates apply to "acquired" rather than "recognized." It's pretty ambiguously worded.

Re: President Obama Signs a Temporary Bill to Encourage More Angel Investing

#30

Post by rdl »

This will help founders as much as it helps angel investors. Assuming you're building a business which is likely to exit at $50mm or less (i.e. most consumer internet companies), the biggest hardship is holding on for 5 years, which could be a couple years after M&A exit.

This also encourages founders to bring early employees into equity ownership by purchasing founders stock, vs. options, so those employees can get this favorable treatment. (generally, buying your stock with a right of repurchase ends up being a win because it converts ST to LT capital gains, anyway).

i.e. on day 0, the company is worth $10k, because the founder puts in $8k of his own money, and the first 4 employees buy their grants for $500 each.

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