Statement by Tech Council President Tom Still:
After 30 years, it was time to bring major portions of the U.S. tax code under review from a competitive perspective. However, policymakers must now be careful to pivot if the tax reform package inhibits the nation’s ability to balance the budget and reduce the deficit. Some specifics clauses of interest to the tech sector and entrepreneurs:
- It will preserve the R&D tax credit, which is essential to many tech-based companies and startups.
- It changes the pass-through rules for certain companies (LLCs, partnerships and S Corps) that helps entrepreneurs who may be currently taxed at the top rate.
- It appears to encourage investment through a provision that would make it possible for business owners to deduct the cost of certain equipment for five years. The last I heard, there were some differences in the House and Senate language.
- It would make it easier for start-up employees to exercise their stock options. The new plan makes stock options taxable only when shares in a company are liquid, and not up-front when an employee exercises their options. Stock options are one major reason people who could get higher salaries elsewhere will work for, or create, a new company. Today, employees must pay taxes up front when they exercise their stock options, with share prices set by the company. That can be a problem for people without cash on hand.
- It allows the nation’s IT industry to compete on a more even playing field in the global marketplace by incentivizing companies to reinvest the profits they earned abroad back in to the United States.