November 14, 2017 the Honorable Orrin Hatch Chairman Senate
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November 14, 2017 The Honorable Orrin Hatch Chairman Senate Finance Committee 104 Hart Office Building Washington, DC 20510 Dear Chairman Hatch: We are a group of startups, investors, and innovators deeply concerned about the proposed changes to the taxation of non-qualified deferred compensation plans in Section III(H)(1) of the Tax Cuts and Jobs Act. This shift would have profound negative consequences for technology start-ups by, among other things, undermining their ability to compete with large incumbents for employees. Section III(H)(1) would require both tax assessment and payment on stock options and other stock-based incentive compensation upon vesting instead of exercise, distribution, or any other liquidity event. The current law, embodied in Section 409A of the Tax Code, enshrines the common-sense notion that employees should pay taxes on income that they actually receive. By making the mere vesting of a stock option a taxable event, an employee would have to pay a tax based upon a hypothetical gain that could take years to become liquid and may never materialize into cash. This would transform stock-based incentive programs from benefits to liabilities overnight and would effectively bar startups from offering this form of compensation. We cannot overemphasize how essential stock-based compensation is to a startup’s ability to recruit and retain talent. Startups do not have the ability to compete with larger firms based upon cash compensation. A startup’s ability to issue stock options levels the playing field by giving potential employees something unique: the ability to share in the company’s rewards as well as its risks and participate in the upside of a new and exciting venture. This is not just limited to the startup’s top managers: according to one study, nearly 75 percent of venture-backed startups provide options to all employees. In addition, startups are themselves commonly founded by people using the proceeds of stock options that they received at previous startups. Stock-based compensation fuels the growth of existing startups and spurs the creation of new companies. The changes proposed by Section III(H)(1) would take stock options off the table for startups, which lack the resources to establish and maintain qualified plans or provide employees with increased cash compensation. This will put startups—which are responsible for all net new job growth— at an insurmountable disadvantage. This will reduce competition, innovation, and job opportunities. Section III(H)(1) therefore undermines the stated purpose of tax reform by reducing job creation. The House of Representatives wisely chose to eliminate this proposal from the House bill. We respectfully request that you remove from Section III(H)(1) from the Senate bill and otherwise decline to change the rules concerning the taxability of non-qualified deferred compensation plans. As written, Section III(H)(1) would cripple startups’ ability to recruit the talent needed to innovate. Sincerely, Adroll Airbnb AltSchool San Francisco, CA San Francisco, CA San Francisco, CA AppNexus Dropbox DuckDuckGo New York, NY San Francisco, CA Paoli, PA Dwolla Eventbrite Foursquare Des Moines, IA San Francisco, CA New York, NY Funding Circle USA GitHub Hyperloop One San Francisco, CA San Francisco, CA Los Angeles, CA Kleiner Perkins IAC Kabbage Caufield Byers Dallas, TX Atlanta, GA Menlo Park, CA Marin Software Incorporated Match Group Medium San Francisco, CA Dallas, TX San Francsico, CA Meetup MongoDB Palantir New York, NY San Francisco, CA San Francisco, CA Palantir Pinterest Postmates Palo Alto, CA San Francsico, CA San Francisco, CA Reddit Salesforce Slack San Francisco, CA San Francisco, CA San Francisco, CA Starry Stride Health Stripe Boston, MA San Francsico, CA San Francisco, CA Twilio Uber Upwork San Francisco, CA San Fransciso, CA Campbell, CA Vimeo Warby Parker Zendesk New York, NY New York, NY San Francisco, CA Aaron King Abdur Chowdhury Aboud Jardaneh CEO Founder & CEO Co-Founder Snapdocs, Inc. Aura Frames SpotAngels San Francisco, CA San Francisco, CA San Francisco, CA Adam Dell Adam Draper Adam Foroughi CEO Founder and Managing Director Co-Founder and CEO Clarity Money Boost VC AppLovin New York, NY San Francisco, CA San Francisco, CA Adam Pittenger Adam Regelmann Adi Sideman CEO Founder and COO CEO Moved Quartzy YouNow New York, NY San Francisco, CA New York, NY Adrian Fenty Adrian Sanders Adriana C Vasquez Co-Founder CEO CEO and Co-Founder Macro Ventures Chargehound Lilu Washington, DC Oakland, CA New York, NY Afton Vechery AJ Forsythe AJ Shankar CEO CEO CEO Modern Fertility iCracked Everlaw San Francsico, CA Redwood City, CA Berkeley, CA Akshay Dodeja Albert Wenger Alex Davidov Co-Founder Managing Partner Principal Terminal 49 Union Square Ventures Core Innovation Capital San Francisco, CA New York, NY Los Angeles, CA Alex Fielding Alex Fishman Alex MacCaw CEO Founder and CEO Founder Ripcord Bugsee Inc. ClearBit San Francisco, CA San Francisco, CA San Francisco, CA Alex Polvi Alex Tapper Alexander Adell CEO Co-Founder CEO CoreOS Sixty Doorman San Francisco, CA San Francisco, CA San Francisco, CA Alexi Robichaux Alexis Ohanian Alexis Rivas CEO Managing Partner Co-Founer and CEO BetterUp Initialized Capital Cover Technologies, Inc. San Francisco, CA San Francisco, CA Gardena, CA Alice Lloyd George Aly Orady Amal Dar Aziz Principal CEO Co-Founder and CEO RRE Ventures Ript Labs, Inc. Maven Technologies New York, NY San Francisco, CA San Francisco, CA Anand Kishore Anand Sampat Andrew Chomer President Co-Founder and CEO Chief Marketing Officer AspireIQ Datmo Hometeam San Francisco, CA Palo Alto, CA New York, NY Andrew Dudum Andrew Feldman Andrew Gutierrez Co-Founder and General Partner Founder and CEO Director Atomic Cerebras Systems Science Exchange San Francisco, CA San Francisco, CA Palo Alto, CA Andrew Hsu Andrew Verhalen Andrew Weissman Co-Founder General Partner Partner Speakeasy Labs Matrix Partners Union Square Ventures San Francisco, CA San Francsico, CA New York, NY Andy Katz-Mayfield Andy Volkmann Ari Paparo Co-Founder & Co-CEO CFO CEO Harry's minuteKEY BeeswaxIO Corporation New York, NY Denver, CO New York, NY Atish Davda Austen Allred Austin Lockwood Co-Founder Co-Founder Founder and CEO EquityZen Inc. Lambda School LocalPost LLC New York, NY San Francisco, CA Redding, CA Austin Oehlerking Austin Steed Bala Raja CEO Founder Co-Founder and CEO Boxbot PickTrace Luminostics San Francisco, CA San Francisco, CA San Jose, CA Bart Riley Ben Anderson Ben Bernard CEO CEO Co-Founder and CTO Metalenz Amino Fieldbook, Inc. Cambridge, MA San Francsico, CA San Francisco, CA Ben Congleton Ben Huh Ben Keighran Co-Founder and CEO CEO CEO Olark Social Construct Company Caffiene Palo Alto, CA Seattle, WA San Francisco, CA Ben Mackinnon Ben Rahnema Ben Rubin Founder & CEO Co-Founder and CEO Founder and CEO Kard Returnbase Houseparty New York, NY San Francisco, CA Irvington, NY Benjamin Chester Bertram Meyer Bertrand Vick Co-Founder and COO CEO CEO Bedly OneDome Global Rev Genomics New York, NY San Raefel, CA San Francisco, CA Beth Ferreira Bilal Mahmood Bill Clerico Managing Partner CEO Co-Founder and CEO WME Ventures ClearBrain, Inc. WePay New York, NY San Francisco, CA San Francisco, CA Bismarck Lepe Borna Safabakhsh Brad Burnham CEO and Founder Co-Founder and CEO Managing Partner Wizeline AgileMD, Inc. Union Square Ventures San Francisco, CA San Francisco, CA New York, NY Brandon Levey Brent Dusing Brett Caine CEO CEO CEO Stitch Labs, Inc. GameSalad Urban Airship San Francisco, CA Austin, TX San Francisco, CA Brian Jeong Brian LeRoux Bryn Jones Co-Founder and CEO Co-Founder and CTO Co-Founder Hawthorne Lab, Inc. Begin GrowSumo New York, NY San Francisco, CA San Francisco, CA Cameron Yarbrough Carol Luong Catheryne Nicholson Founder Vice President CEO & Co-founder Redfish Labs Leadfeeder BlockCypher San Francisco, CA New York, NY Redwood City, CA Cedric Bru Chad Carson Chaim Fried CEO Co-Founder CEO Taulia Pepperdata OWAL San Francsico, CA San Francisco, CA New York, NY Chandan Lodha Charles Douglas-Osborn Charles Hamilton Co-Founder CEO CEO CoinTracker Merlin Onboarding, Inc. Conamix, Inc. Stanford, CA New York, NY New York, NY Charlie Cheever Charlie Maynard Charlie Oppenheimer Founder & CEO Co-Founder and CEO CEO Expo Going Merry Loggly Palo Alto, CA San Francisco, CA San Francisco, CA Chas Ballew Cheryl Dalrymple Chieh Huang CEO CFO CEO Aptible Confluent Boxed Portland, OR San Francisco, CA New York, NY Chris Dean Chris Granger Chris Hutchins Co-Founder CEO Founder & CEO Treasury Prime Kodawa, Inc. Grove San Francisco, CA San Francisco, CA San Francisco, CA Chris Kline Chris Lotz Chris Moore Co-Founder and CTO CEO RideOS TravelJoy Goodcover San Francisco, CA San Francisco, CA San Francisco, CA Chris Ovitz Christian Romming Christopher Dean Founder and Co-CEO Founder and CEO CEO Workpop Etleap Swrve Venice, CA San Francsico, CA San Francisco, CA Christopher Hopper Christopher McCain Christopher Sheehan Co-founder Chief Legal Officer Founder and CEO Aurora Solar General Catalyst WorldCover Palo Alto, CA Cambridge, MA New York, NY Clara Sieg Claudio Pinkus Clement Dleangue Partner Co-Founder Co-Founder and CEO Revolution Codestream Hugging Face Washington, DC Los Angeles, CA New York, NY Colleen Poynton Connor Zwick Courtney Guertin Vice President Co-Founder Founder & CTO Core Innovation Capital Speakeasy Labs EaseCentral Los Angeles, CA San Francisco, CA San Francisco, CA Damon Tassone Dan Herman Dan McEleney Co-Founder and President President & Founder