Policy Update: Startup Act 2.0

Policy Update

Engine has been following closely the evolution of Startup Act, legislation designed to ease the way for startups to access the capital, skilled labor, and research that enables them to grow and prosper. We’re excited to bring to your attention the new and improved Startup Act 2.0, which was released this morning.

We voiced support for S.1965, the original Moran-Warner Startup Act, in March, which promised to provide tax credits for startups, reform the process by which foreign-born STEM graduates of U.S. universities are granted visas, and spur innovation by providing incentives for the commercialization of university research.

Startup 2.0 keeps many of the provisions of the original, and adds key measures for skilled immigration from the Coons-Rubio AGREE act -- in particular, the removal of per-country visa caps. A new R&D tax credit specifically for startups with less than $5 million in annual receipts has been added to allow startups to offset employee taxes and to counterbalance the existing credit which is overwhelmingly used by businesses with over $1 billion in receipts.

After consultation with universities, the new version of the Startup Act modifies the provision dealing with university research to ensure that the rules set forth in the Bayh-Dole Act are not altered. Bayh-Dole, or the Patent and Trademark Law Amendments Act, was adopted in 1980 to ensure that small businesses, universities and nonprofits have ownership of intellectual property created from government funded research.

Some of the earlier measures of Startup Act, such as the call for a comprehensive analysis of the impact of Sarbanes-Oxley on startups, have been removed from the new version due to an overlap with JOBS Act, which was passed earlier this year and dealt with access to capital for startups, most notably legalizing crowdfunding. The income tax credit of S.1965 has also been eliminated as a means to making the bill more fiscally feasible, with Startup 2.0 costing less than 20 percent of the original bill.

We are encouraged by the Senate’s willingness to work on policy initiatives that will have a direct impact on jumpstarting the American economy. We look forward to their colleagues in the House following suit. It’s time to set the table for legislation like Startup Act 2.0 and continue the debate on these fundamental issues that drive our economy.

Correction: An earlier version of this article incorrectly stated that the capital gains exemption of the original Startup Act has been eliminated. The actual provision removed for the release of Startup 2.0 is an income tax credit. Startup 2.0 features a permanent exemption of the capital gains tax on startup stock held for at least 5 years.