The Big Story: Startups need less congressional chaos and more solutions
The House of Representatives has been frozen in place for 17 days, meaning the body is unable to move critical legislation, like funding the government, or pass startup priorities like capital access expansions, childcare funding, and tax fixes by the end of the year. A group of far-right Republicans forced out Speaker Kevin McCarthy (R-Calif.) on October 3rd, and the chamber is unable to continue with legislative business until a new Speaker is selected. Several Republicans have so far failed to garner enough support to lead the House, and there is no clear end in sight, leaving the House unable to move must-pass legislation, like funding the government before the November 17 deadline, and advance startup priorities.
Amidst the background of legislative dysfunction, a number of issues and policy proposals remain top of mind for the startup community. Congress has already missed the expiration deadline of child care stabilization funding, meaning many child care centers will close, care will get more expensive, and parents, including founders, may find themselves without solutions for their families. And as always, access to capital remains the paramount concern for most startups. With lawsuits targeting programs that support underrepresented founders, and threats to the already too-restrictive accredited investor definition looming, policymaker inaction is particularly damaging.
Startups also await several tax policy fixes—but with an end-of-year tax package in jeopardy without a functioning Congress, it is unclear if policymakers will implement a return to immediate spending for R&D expenses or permanently expand the child tax credit to empower, in particular, women founders, to innovate. Startups have actively engaged with policymakers this year on both fronts, sending letters to Congress calling for immediate fixes.
Policy Roundup:
House lawmakers renew call for federal privacy law at AI hearing. A House Energy and Commerce subcommittee this week held a hearing on artificial intelligence (AI), where witnesses and lawmakers from both parties underscored the need for a comprehensive federal data privacy law. AI is a data driven technology, making a data privacy law is foundational to how the technology is developed. The U.S. currently lacks a uniform federal privacy law, instead allowing a cumbersome patchwork of state privacy laws to take shape, and startups have repeatedly called on Congress to pass a privacy law to end the patchwork.
EU pauses threat to net neutrality, U.S. begins effort to restore rules. The European Commission last week unveiled the results of its consultation on charging network access fees—a proposal that would contravene net neutrality principles—revealing a majority of the respondents, including from the startup community, came out strongly against the fees. The Commission left the door open to a return to the proposal in the future, however. Meanwhile in the U.S., the Federal Communications Committee this week voted to begin a rulemaking to restore net neutrality. Net neutrality is critical to ensure an open Internet and level playing field for startups.
Controversial spy program poses threat to startup success abroad. Congress has until the end of the year to decide whether and how to renew a controversial spying program that poses threats to startups’ access to international markets, as we explore in a new blog this week. The program, Section 702 of the Foreign Intelligence Surveillance Act authorizes a broad collection of online communications, and has contributed to the downfall of cross-border data transfer mechanisms relied upon by startups to serve users abroad. Startups only recently regained a reliable mechanism for transatlantic data transfers, and Congress should take steps to ensure that 702 does not imperil that framework.
Lawmakers call for digital trade policy that works for startups. Key lawmakers sent multiple bipartisan letters to the U.S. Trade Representative Katherine Tai both calling for strong digital trade provisions and for action against Canada’s digital services tax. Startups need smart digital trade policies in order to successfully reach markets and be competitive globally. Meanwhile, digital services taxes, like the one being pursued by Canada, threaten to proliferate without a global tax deal, and will hinder startups’ ability to scale, as the lawmakers noted in their letter.
Tax agency enables electronic signatures for common forms filed by startups. This week, the Internal Revenue Service updated its manual to allow e-signatures for filing 83(b) elections, which are frequently filed by startup founders and employees. 83(b) elections enable founders and others to be taxed on the value of equity on the date it is granted, rather than the date it vests, which can mean significant tax savings. The prior method of filing the elections was outdated, inefficient, and bred uncertainty, as we and a coalition of innovation ecosystem organizations noted in a recent letter, and the updated method is a win for startups.
Startup Roundup:
#StartupsEverywhere: Los Angeles, Calif. Hulah is a dating app that empowers women to take control of their dating lives and date only better guys. On Hulah, any woman (in a relationship or single) can join and become a ‘ringleader,’ endorsing guys for other single women to date. In our conversation with Founder and CEO Heather Hopkins, we explored the current challenges surrounding content moderation, intermediary liability, and issues faced by female entrepreneurs.
