I Fought the Law

How Will Closing the ‘Carried Interest’ and ‘Founder’s Stock’ Loopholes Affect New York Tech?


One, two, the White House’s coming for you. While you were busy counting the days until Foursquare’s IPO, the good folks of Washington have been fretting over the debt crisis. Mayhap you’ve heard of it? Well, techies better start paying attention because it looks like it could hit close to home.

At issue are two tax loopholes, “carried interest” and “founder’s stock.” President Obama wants to close “carried interest” tax, estimating that it could raise $20 billion over the next decade.  Congressional Republicans refuse. In The New York Times, Nicholas Kristoff says “carried interest” wins the grand prize for “Most Unconscionable Tax Loophole,” adding, “This loophole has nothing to do with creating jobs and everything to do with protecting some of America’s wealthiest financiers.” While he’s at it, he’d like to do away with the loophole for founder’s stock too.

NetNet’s John Carney has a very different take on founder’s stock, writing, “It’s not some unique bizarre scandalous loophole in the tax code. It actually coheres quite well with the way we tax a lot of other returns on entrepreneurial activity.”

Considering Union Square Ventures’ stake in Zynga’s upcoming IPO and the number of New York start-ups counting down to their S-1 filing, here’s what you need to know. Read More