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You’re an Angel! Angel Investors and Venture Capital

August 02, 2023 (4 min read)

One of the biggest challenges that businesses face, particularly in the start-up stage, is obtaining the requisite amount of funding to establish and sustain the business. In today's economy, a business has several avenues through which to obtain that funding, which include both public and private sources. Two of the most prevalent private sources of start-up capital are from angel investors and venture capitalists. Encouraging investment on the part of angel investors and venture capitalists, particularly those putting their own funds or combined funds at risk, requires additional incentives. Some of these incentives can be found in federal and state tax law provisions.

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  •  Tax Key Legal Developments Tracker (Federal)—keep up to date with key legal developments!
    • Business Entities. Joint Committee on Taxation releases JCX-34-23, Macroeconomic Analysis Of H.R. 3938 The “Build It In America Act,” as ordered to be reported by the Committee on Ways and Means, on June 13, 2023.
    • Business Entities. IRS and Treasury issue final regulations affecting corporations that file consolidated returns and permit consolidated groups that acquire new members that were members of another consolidated group to elect in a year subsequent to the year of acquisition to waive all or part of the pre-acquisition portion of the carryback period for certain losses attributable to the acquired members, where there is a retroactive statutory extension of the net operating loss carryback period. D. 9977, 88Fed. Reg. 44210 July 12, 2023 (Carryback of Consolidated Net Operating Losses).
    • International Taxes. Treasury issues guidance announcing temporary relief for certain foreign taxes paid, emphasizing that the relief is unavailable for foreign digital services taxes. The relief allows taxpayers to determine whether a tax is creditable from the end of 2022 until the end of 2023 using the definition of a "foreign income tax" and the net gain rule under Treasury Reg. 1.901-2(a), (b), as revised in 2021, while eliminating the so-called non-confiscatory gross basis tax rule for those qualifying for the relief. I.R.S. Notice 2023-55.
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