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Start up America – to encourage entrepreneurship

February 9, 2011

Supported by new initiatives and tax incentives, United States President Barack Obama has launched ‘Startup America’, a national campaign to encourage entrepreneurship and private sector investment in job-creating start-ups and small firms.

He announced this “historic partnership with business leaders, investors, universities, foundations, and non-profits” by revealing that leaders in the private sector will launch the ‘Startup America Partnership’, an independent and private-sector led campaign to mobilize private sector commitments. Steve Case, co-founder of AOL and chairman of the Case Foundation, will chair the Partnership.

The initiatives are aimed at uniting a range of public and private commitments to expand access to capital for high-growth startups throughout the country; increase entrepreneurship education and mentorship programmes; strengthen commercialization of the USD 148bn in annual federally-funded research and development, which can generate innovative startups and entirely new industries; identify and remove unnecessary barriers to high-growth startups; and expand collaborations between large companies and startups.

As examples of the latter, Intel and IBM are committing USD 200m and USD 150m respectively to bring companies together, promote entrepreneurs and new business ventures, while HP and Facebook have also confirmed their participation in the scheme.

While the Small Business Administration (SBA) will commit USD 2bn, as a match to private sector investment, over the next five years to accelerate capital support for startups and high-growth firms, the President’s new budget will propose making permanent the elimination of capital gains taxes on certain investments in small businesses.

The 100% exclusion from tax for capital gains realized on the sale of certain small business stock held for more than five years was passed as a temporary provision in 2010 as part of the Small Business Jobs Act signed in September. The amount of gain eligible for the exclusion is limited to the greater of USD 10m, or ten times the taxpayer’s basis in the stock. This provision applies to qualified small business stock issued after December 31, 2010, and before January 1, 2012. However, the government’s 2012 budget proposal would make this provision permanent.

The budget will also propose expanding the New Markets Tax Credit to encourage private sector investment in startups and small businesses operating in lower-income communities.

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