The Tax Cuts and Jobs Act of 2017 and the Impact on the Economy

Congress holds a great amount of influence on how easy it is for small businesses to raise capital.. This week on The Angel Next Door, Marcia speaks with Congressman David Kustoff, representative from the 8th congressional district of Tennessee. Marcia and the Congressman discuss his background and how he came to be a member of the House, as well as his work on the House Committee of Ways and Means introducing new legislation with hopes of making it easier for small businesses to raise capital.  

Congressman Kustoff explains how he got started as an attorney in the Memphis area, eventually being appointed US Attorney for the Western District of Tennessee by President George W Bush. After serving as US Attorney, he returned to his private practice. Growing concerned with the direction he saw the country taking, he saw his opportunity to make a difference when a vacancy in the House opened in his district in Tennessee, and won the seat in 2016. Currently in his 4th term in Congress, David serves on the powerful House Committee of Ways and Means, which holds jurisdiction over taxes, health care, trade, and family support programs.  

In talking with his constituents and businesses in his district, Rep. Kustoff hears a lot about inflation, supply chain and labor issues, and the difficulty small businesses have with navigating tough regulations when raising capital. He explains how in 2017 the Ways and Means Committee enacted the Tax Cuts and Jobs Act (TCJA). Among other things, TCJA greatly lowered the corporate tax rate, encouraging more businesses to be structured as C-Corporations, which can then benefit from the Qualified Small Business Stock (QSBS) provision of IRC 1202. QSBS makes capital gains from small business stocks exempt from federal taxes if they meet certain requirements. Marcia shares an example of how she benefited from IRC 1202 in one of her early investments, which inspired her to take even more money and put it back into the economy and help entrepreneurs.  

Congressman Kustoff points out the importance of legislation that fosters the entrepreneurial spirit, especially given how, without new legislation, the TCJA provisions expire in 2025. It’s for this reason, Rep. Kustoff has introduced the Small Business Investment Act of 2023, which would protect and expand these provisions, provide incentives for investing in startups and small businesses, and make it cheaper for small businesses to raise capital. The Small Business Investment Act of 2023, changes the QSBS holding period for stock, currently at 5 years, to a phased approach, making these investments more attractive to investors. The bill also allows the ownership of convertible debt to count towards the holding period, and expands the eligibility to S-corporations. Congressman Kustoff hopes to gain some movement on the bill quickly, with a companion bill introduced by Senator John Cornyn moving through the Senate. He encourages any listeners with questions about the bill to contact his office.  

This episode delves into how legislation from Congress greatly affects how small businesses raise capital and how the same legislation can make investments more attractive to angel investors. Enjoy!

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