Public Policy Quarterly Newsletter Issue 2

In this Issue: 

What's New in 2024 

With the new year comes new things on the horizon for the Angel community. With the fiscal year budget still not finalized, there are still many on which to stay up to date. In our second edition of the Public Policy Quarterly newsletter, we discuss some of the most important updates on ACA’s main policy interests, including QSBS, investor accreditation, Section 1202, the accredited investor definition, thresholds and workforce development reforms.

Qualified Small Business Stock and Section 1202 

Qualified Small Business Stock (QSBS) provides for up to 100% exclusion of Capital Gains taxes. A qualified small business is an active domestic C corporation whose gross assets, valued at the original cost, do not exceed $50 million on and immediately after its stock issuance. QSBS is treated favorably for capital gains purposes if both the investor and the company meet certain requirements. Section 1202 of the Internal Revenue code allows individuals to invest in small businesses. Companies in the technology, retail, wholesale and manufacturing sectors are eligible as QSBs, but those in hospitality, personal services, the financial sector, farming and mining are not eligible.

Section 1202 allows capital gains from QSBSs to be excluded from federal taxes. This stock must be held for at least five years to exclude the gains and is designed to incentivize small business investments.

In June, Chairman of the Ways and Means Committee Jason Smith (R-MO) introduced the Small Business Jobs Act, H.R. 3937. This bill was reported favorably by the Ways and Means committee, with all but one Republican member voting for the bill and all Democrat members voting against the bill. Rep. Darin LaHood (R-IL) did not vote.

The bill provides tax incentives for investment in small businesses and would increase the general reporting threshold from $600 to $5,000 for services performed by an independent contractor or subcontractor. In addition, this bill would restore reporting requirements for third party network transactions, modify the exclusion of gain from the sale of QSBS, increase the ceiling for expensing of depreciable business assets, establish rural opportunity zones and reinstate reporting requirements for qualified opportunity zones and apply the requirements to qualified rural opportunity zones.

There has been no official progress on this bill since the Ways and Means Committee markup in June and will be an important one to watch in the first part of 2024.

Accredited Investor Definition 

On December 15th, the SEC issued a staff report on the accredited investor definition. This is a review that occurs every four years to assess if the requirements of the current definition should be adjusted or modified for the protection of investors. However, there weren't any recommendations regarding changes to the definition but rather, simply welcomed public input. These public comments could be very important because the SEC’s Division of Corporation Finance is considering recommending that the SEC propose amendments to Regulation D, including updates to the accredited investor definition, and to Form D, that would improve protections for investors. The target date for proposed legislation is April 2024. The December report provided an outline for how and when the accredited investor definition may change soon. 

Also outline in the report outlined that the SEC’s Small Business Advisory Committee adopted recommendations in 2022 that the SEC does not increase the current thresholds for individual investors to qualify as accredited. Going forward, however, the report states that the SEC should consider indexing the financial thresholds for inflation periodically. 

Workforce Development Reforms 

In December, the ACA signed a letter sent to The Department of Homeland Security encouraging them to keep the needs of startups in mind as they progress towards improving and modernizing the H-1B program. With a host of other organizations representing startups and nonprofits, the letter asks the responsible agencies to reconsider efforts that could limit the available talent pool, advance the proposed provisions to encourage beneficiary-controlled businesses to participate in the H-1B program and rethink efforts to restrict the validity for initial beneficiary-owned petitions to 18 months instead of three years. This letter emphasizes how vital immigrants are the to the US economy, the startup ecosystem and the Angel community.

SBA Business Loan Programs 

ACA also wrote a letter in December to the House Small Business Committee expressing their support for the Small Business Administration’s final rule, “Affiliation and Lending Criteria for the SBA Business Loan Programs.” The final rule, which went into effect in May 2023, is aimed at closing gaps in capital access for America’s small business owners. This rule focuses on helping those in underserved communities who are highly entrepreneurial but still face barriers in accessing capital needed to start or grow their business. This new rule changed the SBA’s problematic control-based methodology for determining affiliation that allows small business to qualify for loan programs. In particular, it helps venture-backed startups. The ACA welcomed the SBA’s amended methodology for determining affiliation. Under the new rule, the principle of control of one entity over another will no longer be the basis for establishing affiliation. It also promotes greater certainty and confidence for new and small business applicants and greater participation in SBA assistance programs. The Angel community warmly welcomes this new rule.

R&D Tax Credits in New Tax Package

On January 31st, the House passed the Tax Relief for American Families and Workers Act of 2024. This $78 billion tax bill was passed in a rare, overwhelmingly bipartisan manner by a vote of 357-70.

A bipartisan, bicameral tax package was negotiated in tandem with House Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Chairman Ron Wyden (D-OR). The House Ways and Means Committee marked up the bill earlier in January and it was reported favorably to the house floor in a 40-3 vote.

Angle investors and small business owners have ample reasons to be excited and interested in this new tax package. It reinstates three business deductions that were cut in the 2017 Tax Cuts and Jobs Act. The new bill provides R&D expensing that allows businesses of all sizes to immediately deduct the cost of their US-based R&D investments, rather than over five years. This incentivizes business owners to invest in American-made products and American innovation, helping improve the US standing in the global economic landscape. The bill includes interest deductibility, which allows continued flexibility for businesses forced to borrow at higher interest rates to meet their payroll obligations and expand their businesses. The new provision for 100% expensing restores full and immediate expensing for investments in machines, equipment and vehicles. Additionally, the bill expands the small business expensing cap. This increases the write-off amount of a small business from the $1 million cap enacted in 2017 to $1.29 million.

Finally, the bill aims to build up Main Street by cutting red tape for small businesses by adjusting the reporting threshold for businesses that use subcontract labor from $600 to $1,000. This is the first update to this threshold since the 1950s. Much-needed updates are included to help small businesses stay competitive, advance innovation and keep more facets of their business in the US. These incentives were all made based on numerous recommendations from small business owners across the country.

Going forward, the bill now heads to the Senate where it faces an uncertain future. Senate Majority Leader Chuck Schumer said he supports the bill and wants to work with Sen. Wyden; President Biden has already supported the bill.

With 2025 dubbed as the “Super Bowl for taxes," this is only the beginning of a long year ahead for new tax codes and tax discussions. 

What to know in DC

It's easy to get mixed up in the alphabet soup of acronyms and weird names. In each public policy newsletter, we will take a deeper dive into some of DC’s most important issues.

House Committee on Small Business

The House committee on Small Business has the authority to investigate any matter affecting small businesses and conduct hearings and investigations of Small Business Administration (SBA) and other federal agencies that provide capital to American’s entrepreneurs. Oversight of the SBA includes looking into the effectiveness of the capital access programs to generate jobs in the fastest growing small businesses, whether SBA rules and regulations result in transparent decision making, review of the COVID-19 era provisions like the Paycheck Protection Program, continued examination of the Small Business Lending Fund and State Small Business Credit Initiative, among many other responsibilities.

With the current makeup of the 118th Congress, there are 15 Republicans and 12 Democrats on the committee. Rep. Roger Williams (R-TX) is the Chairman and Rep. Nydia Valezquez (D-NY) is the ranking member.

The ACA frequently writes and signs onto letters written to the Small Business Committee expressing their opinions on certain issues. Our Public Policy team keeps careful watch on the Committee’s hearings that cover topics like burdensome EPA regulations, SBA small business size standards, oversight of the SBA, energy regulations and many more issues.

Who’s New at the SEC 

Another group the ACA keeps close tabs on is the SEC. There are some new faces at the SEC with whom our member should get acquainted. President Biden nominated two new Commissioners that were subsequently confirmed by the US Senate in June 2022. The newest SEC Commissioners are Mark Uyeda and Jaime Lizárraga. Commissioner Uyeda has expertise in corporate and securities law and has worked at the SEC for the past 15 years. He also served as a securities counsel to the Senate Committee on Banking, Housing, and Urban Affairs. Commissioner Lizárraga has more than 30 years of experience in public service and formerly worked as the deputy director of the SEC’s Office of Legislative and Intergovernmental Affairs. In his previous position as Senior Advisor to House Speaker Nancy Pelosi, he oversaw issues regarding financial markets, small business, international finance and immigration. He is committed to protecting investors as well as working families.


While the PATH Act isn’t anything new, it is vital for small business owners and should be understood properly. The Protecting Americans Against Tax Hikes Act was passed in 2015 as a tax reform bill. It renewed and expanded tax credits for individuals, families and businesses while protecting the credits against fraudulent claims. Small businesses and entrepreneurs were particularly helped with this Act. The PATH Act also permanently extended the Research and Development tax credit. Smaller businesses that made less than $50 million in gross receipts can now receive the tax credit under the PATH Act. This also benefited small businesses through the alternative minimum tax and the payroll tax. The PATH Act helps fuel the innovation spirit of small businesses and provides them with critical financial support.

Brief Overview of the Upcoming ACA DC Fly-In 

At the end of February, the Angel Capital Public Policy team is traveling to DC to continue its public policy efforts. Along with the GrayRobinson team, ACA will be meeting with several different Congressional offices and members from the Securities and Exchange Commission (SEC). At the SEC, they are meeting with Commissioner Jaime Lizárraga. In addition, they are meeting with the SEC Office of Small Business Advocate and SEC Division of Corporate Finance. The two-day DC trip is another opportunity for productive, in-person meetings to discuss ACA’s top priorities.

If you're interested in volunteering or joining the ACA Public Policy Committee Ambassador program,  please reach out here! You can learn more about how the Committee engages and works on behalf of all investors here.