BIO Supports Capital Gains Incentive Bill Introduced by Rep. Dunn

(WASHINGTON, D.C., October 2, 1998)...The Biotechnology Industry Organization (BIO) today praised U.S. Rep. Jennifer Dunn (R-Bellevue) of Washington for introducing a House bill that provides substantial capital gains tax incentives for long-term investments in the stocks of small corporations - companies with $300 million or less in market capitalization.

Dunn's proposal would provide a 7 percent capital gains tax rate for new, direct investments in certain corporate stock. The current tax rate for these and other investments is 20 percent.

"I believe we must do more to create an environment for entrepreneurship to thrive because the benefits - good jobs and innovative technologies - will improve the quality of life for millions of Americans," Dunn said. "Nowhere is this more evident than in the biotechnology and computer industries expanding in my home state of Washington. This small business investment initiative will ensure new capital-intensive businesses have the money they need to lay their foundation for growth and success."

To qualify for Dunn's incentive the investment must be in newly issued stock from a corporation through a venture capital or private placement, an initial public offering, or other offering. The stock must be held for at least three years. Included are founders stock, stock options and stock purchased by outside investors. The incentive applies to individual and corporate investors. Those who sell the stock and reinvest within 60 days their gains in newly issued securities of another qualifying corporation could defer payment of any gains tax.

"This incentive is tailor-made for investments in high technology firms," said Chuck Ludlam, BIO vice president for government relations. "It underscores the critical role played by equity capital in fueling high tech research and development."

The tax bill now pending in Congress does not include any capital gains tax incentives. But Dunn, vice chairwoman of the House Republican Leadership Conference and a member of the House Ways and Means Committee and the Republican High Technology Working Group, was instrumental in getting some individual capital gains tax relief in last year's Balanced Budget Act. She also introduced a version of her small business investment initiative and it came close to being included in the 1997 tax legislation.

"Congresswoman Dunn is establishing her leadership role on the critical capital formation issue next year," Ludlam said. " There's no time to take up this proposal before Congress adjourns next week, but she now is positioned to fight for entrepreneurs when Congress reconvenes in January.

"This latest proposal," Ludlam added, "dovetails perfectly with the other principal capital gains proposal, a bill introduced by House Speaker Newt Gingrich, to lower the capital gains tax rate for all types of capital investments from 20 percent to 15 percent. BIO supports both bills."

The Biotechnology Industry Organization (BIO) represents more than 800 biotechnology companies, academic institutions and state biotechnology centers in 46 states and 25 nations. BIO members are involved in the research and development of health care, agricultural, industrial and environmental biotechnology products.