Capital Gains Tax Relief Act Introduced to Congress; RIBA Helps Craft Legislation in Support of Small Cap Investment Incentive.

Business Editors

WASHINGTON--(BUSINESS WIRE)--Oct. 25, 2000

Congressman James C. Greenwood (R-PA) introduced a bill that offers a tax break to investors in small publicly traded companies, as well as an incentive to invest in the small business economy.

A strong proponent of this legislation is the Regional Investment Bankers Association (RIBA), a trade group that supports small public and private companies seeking growth capital, and provided technical guidance during the development of the bill. RIBA's chairman Kenneth Kamen, commented, "We need to keep in mind that small businesses, not big ones, are driving the longest economic expansion in U.S. history. This tax break provides an incentive to invest in the small public companies that have been hindered by constraints put in place to regulate market activity. Our goal is to keep this important sector of our economy strong."

The bill originated in response to issues raised during Kamen's testimony, "Effects of Market Reform on the Small Issuer Marketplace," before the House Commerce Committee in May. Kamen testified that among other items, the tightening of listing requirements for Nasdaq SmallCap Market, the shift to longer trading hours, and the emergence of Electronic Communications Networks where investors trade securities, are decreasing investor interest in small cap stocks. These companies have been relegated to second tier trading venues like the Over-the-Counter Bulletin Board and the Pink Sheets where they are unable to draw significant investor interest. Ultimately, the investor capital needed to support the small issuer marketplace has been redirected, leaving thousands of companies with no access to growth capital.

As a member of the House Commerce Committee and sponsor of this proposed legislation, Greenwood worked with Kamen and his trade group when developing the bill, "Ken's support and guidance has proved to be an invaluable resource. The issues surrounding this legislation are complex, but once unearthed, they offer insight into the state of the small business economy."

"We tried to find a mutually beneficial solution," Greenwood added. "One that considers the interests of small business and recognizes the noble intentions of securities regulators to create a fair market environment. We have found a way to generate investor interest and encourage long-term investment in small public companies without interfering with the regulatory initiatives."

The bill, "Small Investment Tax Relief of 2000," was introduced into the second session of the 106th Congress. If enacted, this bill would offer capital gains tax relief on any non-corporate investment in a public company with a market capitalization less than $150 million, when the investment is held in excess of one year.

Organized in 1994, The Regional Investment Bankers Association (RIBA) is a national association of NASD regional and independent broker-dealer and investment banking firms seeking to strengthen the free-enterprise system, and to provide a vital source of information and education to its members and the investing public.