CAPITAL GAINS TAX EXEMPTION FOR START-UP INVESTMENTS CLEARS HOUSE

CAPITAL GAINS TAX EXEMPTION FOR START-UP INVESTMENTS CLEARS HOUSE Feb. 27 as part of the Democratic tax and economic growth plan. The provision would exempt from taxation half of the capital gains from investments held for at least five years and purchased directly from companies with gross assets valued at less than $100 mil. The plan, which applies only to individuals' stock purchases after Feb. 1, 1992, draws on earlier legislation sponsored by Rep. Matsui (D-Calif.) and Sen. Bumpers (D-Ark.) as the "Enterprise Capital Formation Act" (HR 3741/S 1932) ("The Pink Sheet" Nov. 11, 1991, In Brief). The Industrial Biotechnology Association hailed the bill's capital gains section as a "tremendous victory for U.S. biotechnology companies because it will make long-term investment in our industry more attractive than ever." IBA added: "The measure will help many small- and medium-size biotechnology companies that are considering private placements or public offerings of their stock." Adopted 221-209, the House-passed bill also would make permanent the tax credit for increased expenditures in research and development. The Senate Finance Committee plans to take up the tax and economic growth package March 3. The session could be a forum for committee member Pryor (D-Ark.) to promote his bill, S 2000. Pryor's legislation includes a provision to reduce Sec. 936 tax credits for pharmaceutical companies if product prices increase more quickly than general inflation ("The Pink Sheet" Nov. 25, 1991, p. 4). Pryor has not signaled an intention to try to tie S 2000 to the larger tax and growth bill, but the hearing would provide an opportunity to publicize the measure.