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The Venture Alley A blog about business and legal issues important to entrepreneurs, startups, venture capitalists and angel investors.

Tax Changes – Implications for Venture Capital

Posted in For Investors and Fund Managers, Tax, VC & Private Equity

Asher Headshot - Resized.pngCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

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.