Posted by Jeff Butler on April 09, 2014

Congress looks to angels to revive economy

By J.D. Harrison, Published: April 1 | Updated: Wednesday, April 2, 7:45 AM

Hoping to fuel more job-creating companies, lawmakers on both sides of the aisle are crafting legislation intended to encourage individual start-up investors, commonly called “angel investors,” to pour even more capital into new and growing businesses — but they don’t all agree on the best way to help.

“We want you to make more investments, we want you to take more risks,” Sen. Chris Murphy (D-Conn.) told investors at the Angel Capital Association’s annual summit last week in Washington. “So why don’t we take a look at our regulatory structure so that we’re reducing the barriers to the type of investments that you make, not increasing them.”

In the United States, angel investors funnel more than $1 billion into thousands of early-stage companies every year, and more of that money is moving into rapidly growing sectors like mobile and health care technology, according to a new report by Silicon Valley Bank and the Angel Resource Institute, a research organization.

In addition, angel funding is increasingly spread out across the country, as opposed to traditional venture capital (pooled money among a group of investors), which has long been concentrated in metropolitan areas, particularly technology hubs like New York City, Boston and Silicon Valley in California.

Rep. Patrick McHenry (R-N.C.) emphasized that second point in his own remarks at the conference, calling angel investors “very important for us in the rest of America, the ones outside of large urban areas, to ensure that entrepreneurs with great ideas have an opportunity to get started.”

In an attempt to encourage those investors to put more of the their wealth behind a larger number of companies, Murphy, McHenry and other lawmakers in both chambers are working on proposals meant to make start-up investing simpler and more financially appealing. Here’s a look two of the ideas they are working on right now in Congress.

National angel tax credit

Murphy, for one, has put forth a bill that would create a national angel tax credit, which would give investors a tax break worth up to 25 percent of their total annual investments in high-tech start-ups based in the United States.

The proposal is modeled after a program in Murphy’s state, which allows Connecticut investors who funnel at least $100,000 to an early-stage business in certain sectors to take an income tax credit equaling up to 25 percent of their investment. Since it started in 2010, it has supported more than 200 investments from 90 angel investors going to dozens of companies in fields like biotech, clean technology and information technology.

“Our tax credit has worked,” Murphy said. In addition to funding companies that create jobs, he argued that expanding the credit nationwide will help “target growth in the science, technology and engineering fields, so the United States can continue to lead the world in innovation.”

Murphy acknowledged that the proposal could be a tough sell as policymakers are currently looking for ways to simplify the tax code, not add new deductions. Moreover, the proposal has not sat well with consumer groups, who have slammed the tax break as yet another handout to some of wealthiest Americans.

However, David L. Verill, founder of Hub Angels Investment Group in Boston and chairman of the Angel Capital Association, says that with successful entrepreneurs-turned-investors, that money will nearly always be funneled right back into the economy. Citing talks with other angel investors, he believes most would “plow the savings they get from the tax credit right back into another company.”

“So it’s not going into the third house or the yacht or something like that,” he said. “It’s getting churned right back into the entrepreneurial ecosystem.”

Reworking the JOBS Act

North Carolina’s McHenry called the national angel tax credit idea a good idea — but he says lawmakers should first follow up on the JOBS Act.

Signed into law two years ago, the Jumpstart Our Business Startups (JOBS) Act directed the Securities and Exchange Commission to ease a number of restrictions on the way entrepreneurs can communicate with and solicit funding from investors. However, a number of lawmakers and investment groups have complained that, in writing the rules to implement those changes, the SEC has actually made it harder rather than easier for companies to reach out to investors.

As part of the law, for instance, regulators were to lift the ban on what is called general solicitation, which had prevented companies from widely advertising their securities offerings to investors. In doing so, though, officials haveproposed some new requirements for certain investors — requirements that McHenry says have made some of the key provisions in the law “unworkable.”

He pointed out that regulators now require investors in some cases to file documentation two weeks in advance of launching discussions with a company in which they may consider investing. Noting that angel investors only tend to invest in a tiny fraction of the businesses from which they hear pitches, McHenry said “the idea that you are going to prefile 15 days before you even start discussions is absolutely absurd.”

Meanwhile, the proposed regulations could require some angel investors to start proving their level of wealth via third-party certification, moving away from a longstanding precedent of self-certification for accredited investors.

“They’re putting friction where there wasn’t any before,” Verill said.

If the agency doesn’t amend some of those rules, Congress may step in.

“At the end of the day, it’s going to be up to Congress to legislate and fix this problem, and we’re working on that now,” McHenry said, later adding, “I think you’ll see further action in a bipartisan way to hold [the SEC] accountable.”

However, that might not happen right away. McHenry noted that the regulations are already well behind schedule, with some rules still yet to be finalized. And with the mid-term elections looming, many lawmakers are currently too preoccupied on the campaign trail to craft and debate new legislation on the Hill.

Follow J.D. Harrison and On Small Business on Twitter.

Posted by on April 17, 2013

WASHINGTON – By ignoring the deadline to implement a key provision of a bipartisan law approved a year ago, the Securities and Exchange Commission (SEC) is costing America’s struggling economy desperately needed jobs, members of the Financial Services Oversight and Investigations Subcommittee said today during a hearing.

While some provisions of the bipartisan JOBS – Jumpstart Our Business Startups – Act went into effect when it was signed into law, the SEC has failed to meet the law’s deadlines to write required rules for other provisions that will help small businesses raise capital and hire workers.

The subcommittee hearing focused specifically on one section of the JOBS Act that would remove an outdated SEC regulatory ban preventing small companies from using advertisements to find accredited investors. The law required the SEC to implement this section by July 4, 2012.

SEC attorneys recommended issuing an interim final rule by the legal deadline. However, the SEC instead adopted a proposed rule rather than an interim final rule – meaning the agency will not be able to finalize regulations to lift the advertisement ban until sometime later this year.

Internal SEC emails later revealed that then-SEC Chairman Mary Schapiro delayed implementing the JOBS Act after a Washington lobbyist informed her that special interest groups “were prepared to be quite aggressive” in criticizing the SEC if it moved forward.

Schapiro told her chief of staff and a SEC commissioner in an email about the lobbyist’s comments and worried that the criticism would tarnish her “legacy” at the agency.

“The SEC’s decision to delay implementation of major provisions of the JOBS Act is certainly disappointing, but to learn the former chairman prioritized special interest groups over adhering to the implementation of a strong bipartisan law is entirely unacceptable,” said Subcommittee Chairman Patrick McHenry (R-NC). “I understand the SEC is under new leadership, and I have hope that the commission is poised to begin finalizing the provisions in the JOBS Act, as promised in the Rose Garden one year ago this month.”

Subcommittee members noted the SEC’s decision to disregard the legal deadline to implement the JOBS Act comes while the SEC has suffered a series of recent legal setbacks. This is prompting concerns the agency is both misallocating its resources and misapplying its regulatory enforcement authorities.

In 2011, the D.C. Circuit Court of Appeals struck down an SEC rule, finding that the SEC “inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters.”

In 2013, a unanimous U.S. Supreme Court rejected an attempt by the SEC to avoid the statute of limitations in an enforcement action. Specifically, the SEC sought to have the statute of limitations begin to run upon the commission’s discovery of the possible fraud violation, instead of when the alleged violation actually took place.

Read more at FinancialServices.House.Gov


Posted by on April 05, 2013


Congressman McHenry Announces $48,000 Homeland Security Grant to Lawndale Fire Department in Cleveland County
U.S. Department of Homeland Security awards SAFER funds to local department

WASHINGTON – Today, Congressman Patrick McHenry (R-NC) announced $48,000 in a U.S. Department of Homeland Security (DHS) grant to a local fire department in the Tenth Congressional District.


The grant will go to the Lawndale Fire Department in Cleveland County, and comes in the twenty-first round of the FY 2012 Staffing for Adequate Fire and Emergency Response (SAFER) Grant awards.  SAFER was established to assist local fire departments to increase their staffing and deployment capabilities in order to respond to emergencies whenever they may occur.  Local departments applied for the grants, and the program is administered by the Grant Programs Directorate of the Federal Emergency Management Agency in cooperation with the U.S. Fire Administration. 

According to Lawndale Assistant Fire Chief Steven McMurry, the SAFER funds will be used to establish a mileage reimbursement program for department volunteers. 

“Communities like Lawndale have been hard hit in recent years by the loss of textile jobs,” said Congressman McHenry.  “This SAFER Grant will assist the Lawndale Fire Department in retaining and recruiting volunteers to maintain a superior level of fire protection for the citizens of Lawndale.”

Lawndale is the first Tenth District department to receive SAFER funding in this fiscal cycle.  Grants will continue to be announced in rounds weekly through the coming months.  



Posted by on March 28, 2013
Congressman McHenry Announces $78,375 Homeland Security Grant to Waco Community Volunteer Fire Department in Cleveland County
U.S. Department of Homeland Security awards Assistance to Firefighter Grant funds to local department

WASHINGTON – Today, Congressman Patrick McHenry (R-NC-10) announced $78,375 in a U.S. Department of Homeland Security (DHS) grant to a local fire department in the Tenth Congressional District.

The grant will go to the Waco Community Volunteer Fire Department in Cleveland County, and comes in the nineteenth round of the 2012 fiscal year Assistance to Firefighters Grant Program (AFG), which aims to help firefighters and first responders throughout the country.  Local departments applied for the grants, and the program is administered by the Grant Programs Directorate of the Federal Emergency Management Agency in cooperation with the U.S. Fire Administration.  

According to Waco Fire Chief Kevin Gordon, the grant funds will be used to purchase dual band communications equipment.  “Our response area lies in both Cleveland and Gaston Counties,” said Chief Gordon.  “Cleveland County Emergency Communications operates on an 800 megahertz system and Gaston County does not, making interoperability an issue for a department such as ours.  These radios will allow us to operate seamlessly no matter which county we are responding in.”

“Waco is blessed to have a professional fire service with Chief Kevin Gordon at the helm,” commented Congressman McHenry.  “I was proud to visit their department a few years ago and commend them for their dedication to serving their community.” 

A panel of fire experts at DHS awards AFG grants through a competitive review process.  Congressman McHenry hosts workshops for 10th District EMS and fire departments to help guide personnel through the process and give them an inside view of what the committee looks for.  The workshops are taught by Cherryville Fire Chief Jeff Cash, a nationally recognized expert in his field and former member of DHS’s AFG review committee.  Since Congressman McHenry and Chief Cash began the program, 10th District EMS and fire departments have consistently won more grants than departments in most of North Carolina’s other Congressional Districts.  

During the 2011 AFG funding cycle, $107,015 was awarded in six grants in the 10th District. Thus far in the 2012 funding cycle, $34,303 has been awarded to 10th District departments.

Grants will continue to be announced in rounds weekly through the coming months.  


Posted by on January 31, 2013


Crowdfunding has the potential to revolutionize the financing of small business, transforming millions of users of social media such as Facebook into overnight venture capitalists, and giving life to valuable business ideas that might otherwise go unfunded. Entrepreneurs have already used this fundraising technique on popular crowdfunding websites such as Indiegogo, Kickstarter and Startsomegood to get their ideas off the ground—including a device to track a person's daily activities, an art book about the Dead Sea, and an effort to support poor communities in Bangladesh.

Though crowdfunding is still in its infancy, the ability to raise capital via the Internet may in time become a significant spur for economic growth—to say nothing of giving ordinary investors the opportunity to get in on the ground floor of the next big idea.

Last year Congress passed the JOBS Act—for Jumpstart Our Business Startups—to remove the barriers in securities laws that prevent entrepreneurs from using crowdfunding to sell equity to ordinary investors and let companies raise up to $1 million through the Internet. President Obama signed the law this past April, and the Securities and Exchange Commission is tasked with implementing its provisions. But the agency has been slow to adopt new regulations and is asking for more time. The delay has been attributed to the complexity of the issues and the need to get the rules right.

Yet it might be wishful thinking to believe that the SEC can get these rules right, at least on the first try, because the effects of the regulations are hard to predict in such a new investing realm. If we require companies that raise more than $500,000 through crowdfunding to provide investors with audited financial statements (a rule that the SEC is considering), will that substantially reduce the incidence of fraud? Or will it undermine crowdfunding by imposing an impossible requirement on companies that don't yet have any financials to audit?

Crowdfunding raises dozens of such thorny questions for which there are no reliable answers because of the untested waters. Instead of trying to get the rules right on the first try, why not take an approach that will maximize the probability of getting it right a few years down the road?

A regulatory experiment might do the trick. Specifically, the SEC, in adopting its rules, could treat crowdfunding with a relatively light regulatory touch: for example, by not requiring audited financials but specifying that the rule will expire after three to five years. If the evidence over that period suggests the incidence of fraud is high, then the agency might impose stricter and more permanent requirements.

True, an agency or Congress can always change its rules or laws after the fact in light of experience. But that's not always so easy. A sunset provision, however, forces a regulator to overcome the inertia of the status quo. Particularly with crowdfunding, the SEC can take positive steps to gather the relevant information that will be necessary when it revisits the rules after the test period.

An experimental approach isn't free of obstacles. Interest groups that favor a particular rule or regulation will, everything else being equal, strongly prefer that their approach be adopted on a permanent basis. Federal courts, especially the D.C. Circuit Court of Appeals, have in recent years required the agency to make a more thorough case that the benefits outweigh a rule's costs. This requirement could be a problem for rules that are deliberately experimental.

Still, the hurdles might be overcome. On the political front, experimental crowdfunding rules might be precisely what is needed to reach consensus and to prevent gridlock and legal challenges. It would give those who favor light regulation a limited period to see what happens. And it would give those who favor strict regulations the evidence they need to make the case. Federal courts might also give their blessing to a regulatory approach designed to generate the data necessary to satisfy cost-benefit analysis.

If crowdfunding really is the innovation that many anticipate, investors should be allowed to take advantage of it sooner rather than later. We may end up with a better, more robust system for raising small business capital than endlessly agonizing over the unprovable "right rules." An experimental approach to regulation might be the way to get the JOBS Act to start producing jobs.

Finally, there would be a satisfying symmetry in getting to the optimal regulatory regime by using the type of innovation and experimentation that characterizes the very business startups the JOBS Act is designed to help.

Mr. Gubler is professor of law at Arizona State University's Sandra Day O'Connor College of Law. 

Read this article at the Wall Street Journal website here.

Posted by Ryan Minto on January 30, 2013
Black Mountain, N.C. – Today, Congressman Patrick McHenry (NC-10) participated in a ribbon-cutting ceremony for a new Buncombe County office with leaders and elected officials from across Buncombe County. The office will serve the residents of Buncombe County and surrounding areas.

"My number one priority as a representative has always been to provide the best constituent services possible. If folks have an issue they need assistance with, we're here to help and answer any questions we can. I'd personally like to thank Mayor Bartlett and the Town of Black Mountain for the office space in the Black Mountain Town Hall."

Constituents who need assistance working with the Small Business Administration, Social Security Administration, with Medicare, Veterans benefits, procuring a passport, or other issues with the federal government can contact the office. 

The office is located at 160 Midland Avenue in Black Mountain. 


Posted by Ryan Minto on August 16, 2012


Thanks to several years of fiscal restraint during the 1990s, the burden of federal spending dropped to 18.2% of gross domestic product by the time Bill Clinton left office. The federal budget today consumes more than 24% of economic output, a one-third increase since 2001 in the share of the U.S. economy allocated by politics rather than market forces. That makes the Republican House budget, which would reverse this trend, extremely important for the economic health of the country.

Both political parties deserve blame for the spending spree that's put America in a fiscal ditch. President George W. Bush was a big spender and President Obama has compounded the damage with his stimulus spending and other programs.

But the era of bipartisan big government may have come to an end. Largely thanks to Rep. Paul Ryan and the fiscal blueprint he prepared as chairman of the House Budget Committee earlier this year, the GOP has begun climbing back on the wagon of fiscal sobriety and has shown at least some willingness to restrain the growth of government.

The Ryan budget has generated considerable controversy in Washington, and it will become even more of an issue now that Mr. Ryan is Mitt Romney's running mate. So it's an appropriate time to analyze the plan and consider what it would mean for America.


Chad Crowe

The most important headline about the Ryan budget is that it limits the growth rate of federal spending, with outlays increasing by an average of 3.1% annually over the next 10 years. If spending is left on autopilot, by contrast, it would grow by 4.3% (or nearly 39% faster). If President Obama is re-elected, the burden of spending presumably will climb more rapidly.

This comes as a surprise to many people since the press is filled with stories about the Ryan budget imposing trillions of dollars of "savage" and "draconian" spending cuts. All of these stories, however, are based on Washington's misleading budget process that automatically assumes an ever-expanding government. The 4.3% "base line" increase is the benchmark for measuring "cuts"—even though spending is rising rather than falling, and it's only the rate of spending growth that is being slowed.

Even limiting spending so it grows by 3.1% per year, as Mr. Ryan proposes, quickly leads to less red ink. This is because federal tax revenues are projected by the House Budget Committee to increase 6.6% annually over the next 10 years if the House budget is approved (and this assumes the Bush tax cuts are made permanent). Since revenues would climb more than twice as fast as spending, the deficit would drop to about 1% of gross domestic product by the end of the 10-year budget window.

To balance the budget within 10 years would require that outlays grow by about 2% each year. Spending in the Ryan budget means the federal budget reaches balance in 2040. There are many who would prefer that the deficit come down more quickly, but from a jobs and growth perspective, it isn't the deficit that matters.

Rather, what matters for prosperity and living standards is the degree to which labor and capital are used productively. This is why policy makers should focus on reducing the burden of government spending as a share of GDP—leaving more resources in the private economy.

The simple way of making this happen is to follow what I've been calling the golden rule of good fiscal policy: The private sector should grow faster than the government. This is what happens with the Ryan budget. The Congressional Budget Office expects nominal economic output (before inflation) to grow about 5% each year over the next decade. So if federal spending grows 3.1% annually, the burden of federal spending slowly shrinks as a share of GDP.

According to the House Budget Committee, the federal budget would consume slightly less than 20% of economic output if the Ryan budget remained in place for 10 years. This would be remarkable progress considering that the federal government is now consuming 24% of GDP vs. Mr. Clinton's 18.2% in 2001. If Paul Ryan's policies are social Darwinism, as Mr. Obama and his allies allege, one can only speculate where Bill Clinton ranks in their estimation.

Spending restraint also creates more leeway for good tax policy. Regardless of what you think about deficits, the political reality is that it is difficult to lower tax rates if government borrowing remains at high or rising levels. If deficit spending continues at current levels, then higher tax rates are almost sure to follow. And higher tax rates can't create an environment conducive to more investment and jobs.

The Ryan budget avoids this unpleasant outcome by addressing the problem of excessive government spending. This makes it possible to extend the 2001 and 2003 tax-rate reductions. It also clears the way for other pro-growth reforms, such as Gov. Romney's proposed across-the-board 20% income tax cut, a more competitive 25% corporate tax rate, and less double-taxation of dividends and capital gains.

One of the best features of the Ryan budget is that he reforms the two big health entitlements instead of simply trying to save money. Medicaid gets block-granted to the states, building on the success of welfare reform in the 1990s. And Medicare is modernized by creating a premium-support option for people retiring in 2022 and beyond.

This is much better than the traditional Beltway approach of trying to save money with price controls on health-care providers and means testing on health-care consumers. Price controls are notoriously ineffective—because health-care providers adapt by ordering more tests and procedures—and politically unsustainable due to lobbying pressure. Means testing imposes an indirect penalty on people who save and invest during their working years. That should be a nonstarter for a political party that seeks to encourage productive behavior and discourage dependency.

But good entitlement policy also is a godsend for taxpayers, particularly in the long run. Without reform, the burden of federal spending will jump to 35% of GDP by 2040, compared to 18.75% of output under the Ryan budget.

Assuming the GOP ticket prevails in November, Mitt Romney will make the big decisions on fiscal policy. But there is no escaping the fiscal math. If Mr. Romney intends to keep his no-tax-hike promise, he has to restrain the growth of spending. This doesn't mean he has to go with every detail of the Ryan budget—but it's certainly a good place to start.

Mr. Mitchell is a senior fellow at the Cato Institute.

A version of this article appeared August 16, 2012, on page A11 in the U.S. edition of The Wall Street Journal, with the headline: What's Really in the Ryan Budget.

Posted by on June 14, 2012

While I was home here in Western North Carolina today, a summer intern in our D.C. office, Ariel Cohen, spent the morning honoring the legacy of local war hero Otis Glenn.

Hundreds of Americans gathered at the Vietnam Memorial Wall in Washington D.C on Flag Day to pay tribute to their family, friends and loved ones who courageously fought in the Vietnam War.  Among the names read included longtime Burke County resident and Vietnam veteran Glenn Otis.

Glenn served as a sergeant in the United States Marine Corps, where his bravery in both the battles of Khe Sanh and Con Thien earned him a Purple Heart medal. After he completed his service in 1968, Glenn received a Presidential Citation for Bravery, and then returned home to North Carolina.

Although Sgt. Glenn came home from Vietnam with no external physical wounds, the battlefields left his lungs in poor condition. His health deteriorated over time, and as a result Sgt. Glenn died in 2007 due to internal wounds from his service. Although his name is not in scripted on the Vietnam Memorial Wall, he is counted among the thousands of American patriots who gave their lives as a result of valiantly serving in Vietnam. 

Otis Glenn’s wife, Judith Glenn, read her husband's name in front of the Vietnam Veteran’s Memorial Wall in 2009 and added his name to the Vietnam Honor Roll Book to serve as a permanent remembrance of his service.

Over fifty years after his homecoming, Sgt. Glenn’s name continues to be spoken at the wall. The annual Flag Day ceremony commemorates not only those who fell on the battlefield, but also those who perished as a result of war injuries once they returned home.

In 2012, 96 additional heroes were inducted into the Vietnam Honor Roll Book.

During the 1960s, much protest arose regarding whether or not the United States should actually be engaged in the war. As a result, many war heroes never received a proper homecoming or welcome from their fellow citizens. Speakers at the memorial event today called upon citizens to remember the patriotism of those who served in Vietnam as America continues to face new challenges. 

Posted by on November 04, 2011

Thumbs up, thumbs down

By The Record Editorial Staff

THUMBS UP to U.S. Rep. Patrick McHenry for crafting a bill to help business owners that House members couldn’t refuse. His legislation to allow small businesses and entrepreneurs to raise money by securing small contributions from many sources – called “crowdfunding” – cleared the full House by a vote of 407 to 17. That’s a margin almost unheard of, given the divisiveness in Congress these days. The legislation would allow companies to raise up to $2 million, with individuals limited to investments of $10,000 or 10 percent of their annual income. Now, the Securities and Exchange Commission prohibits crowdfunding. It’s a good bill that can provide smaller companies with much-needed start-up money or operating expenses with relatively little risk to investors. We urge the Senate to give the Entrepreneur Access to Capital Act the same support as the House.