A new targeted capital gains bill that should benefit emergingbiotech companies was introduced Tuesday into the U.S. Senateby Dale Bumpers, D-Ark., and into the House of Representativesby Robert Matsui, D-Calif.
Its intent is to amend U.S. tax law to provide a capital gains taxdifferential for individual and corporate taxpayers who makehigh-risk, long-term growth-oriented venture and seed capitalinvestments in start-up and other small companies.
The small business capital gains provision contained in theeconomic growth package introduced Tuesday is similar to onepassed last year by the House, but vetoed by then-PresidentBush. Both biotech trade associations, the IndustrialBiotechnology Association and the Association of BiotechnologyCompanies, worked closely with Sen. Bumpers in drafting thenewest version, which makes small businesses the chiefbeneficiaries of tax benefits for long-term investors.
In particular, the bill provides that the first $5 million raisedby a company be treated as seed capital and the first $100million be treated as venture capital. Seed and venture capitalgains earned after a five-year holding period would be eligiblefor a 50 percent exclusion. In addition, seed capitalinvestments would be entitled to an additional 10 percentexclusion for each year beyond five years.
To qualify, stock must be purchased after the bill's enactment,directly from a company with gross assets of less than $100million. Stock purchased on the secondary market does notqualify.
"Enactment of this provision would be an engine of economicgrowth for U.S. biotechnology companies because it will makelong-term investment in our industry more attractive thanever," said Richard Godown, president of IBA.
-- Jennifer Van Brunt Senior Editor
(c) 1997 American Health Consultants. All rights reserved.