Investors and the collective startup community remain hopeful that QSBS tax exemptions will remain intact after Democratic Senator Joe Manchin of West Virginia confirmed his decision to oppose the Build Back Better Act (BBBA). Senator Manchin expounded on the details of his opposition to the bill on December 19th, 2021, with Bret Baier on Fox News.
Senator Manchin’s Opposition of the BBBA
Senator Manchin detailed the components he found concerning about the proposed legislation. At the top of his list of oppositions were the macro factors surrounding the act’s implementation at this time; inflation, rising national debt, geopolitical unrest, and reemerging COVID concerns.
Senator Manchin’s immediate opposition is primarily rooted in the spending aspects of the BBBA. Although his objections are not directly tied to the QSBS amendment, Manchin adamantly confirmed his aim to rejuvenate the West Virginian economy.
West Virginia’s Growing Tech Sector Provides a Reason to Keep QSBS As-Is
West Virginia’s tech sector continues to grow, bringing about job creation and job retention. Since 2012, the StartUp West Virginia program has provided and contributed to prototypes and advancing manufacturing services throughout the state. It has also provided mentorship to entrepreneurs and small businesses with a range of startup services such as consultation, mentoring, research and development, legal aid, financial direction, and more. With the help of companies like TechConnect, the StartUp West Virginia program has provided education and development programs to more than 2,800 people. The Executive Director of TechConnect, Anne Barth, stated: “We’re showing progress in West Virginia’s innovation economy. It takes time, and it may not yet show up on national rankings, but we’re developing an innovation ecosystem that supports cluster development and growth.”
The progression and steady growth in the West Virginia tech sector could be reason enough for Senator Manchin to support programs that fuel innovation like those qualifying for QSBS tax exemptions. Investments that flood the startup ecosystem with capital on a state and national level show promise in jolting the economy out of the recent recession and COVID setbacks over the last year.
What’s next for the Build Back Better Act?
After the initial shock of Senator Manchin’s opposition to the BBBA faded, many of his political peers believe they can find some common ground in the days ahead. The Democrats remain hopeful to reach an agreement early in the new year through potential restructuring, compromising, and scaling back on aspects of the proposed legislation.
Senate Finance Committee Chair Ron Wyden has recommended that Congress redirect attention to providing financial security, generating clean energy jobs, and lowering the cost of health care and prescription drugs. These political objectives bode well in regards to programs that boost the economic ecosystem, like many that qualify for QSBS tax exemptions.
If the bill pushes forward, will the QSBS amendment get cut?
While there is still uncertainty over the details and possible changes of the QSBS amendment. The score shows that the QSBS amendment only generates $5.7 billion over ten years, so a scaled-back BBBA may improve the prospects of QSBS remaining as-is. However, if a vote on the current BBBA is scheduled; then Senators voting in favor of the act may soon be on the record indicating their willingness to reduce the QSBS benefits and risk driving capital to innovation. The question remains, why destroy a program that contributes to investment growth and job generation in favor of those less proven to contribute to national economic rebuilding and regeneration?
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This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.