Venture Capitalists Cheer Tax Bill

Congress passed a bill Thursday that did not change the tax treatment of carried interest.
By Olivia Oran ,

NEW YORK (

TheStreet

) -- Venture capitalists likely breathed a sigh of relief Thursday after the House of Representatives passed a tax bill that did not contain provisions over the tax treatment of carried interest.

VCs have been concerned that

Congress could enact change to tax carried interest

-- profits made after venture capitalists successfully cash out of their portfolio companies -- at higher ordinary income rates rather than at the capital gains rate of 15%.

Proponents of carried interest say it encourages firms to invest in young, risky companies and the results of not investing in these firms could be damaging to the economy.

While venture capital investments comprise only 0.2% of the U.S. GDP, venture capital is responsible for more than 21% of the nation's GDP through job creation, according to the National Venture Capital Association.

"Here's this tiny industry that has facilitated the most competitive, fastest growing parts of the economy," said Paul Holland, partner at

Foundation Capital

and the former president of the Western Association of Venture Capitalists. "The notion of making it harder for investors to fund companies isn't logical at a time when we have 11% unemployment."

--Written by Olivia Oran in New York.

>To follow the writer on Twitter, go to

http://twitter.com/Ozoran

.

>To submit a news tip, send an email to:

tips@thestreet.com

.

Loading ...