Salix's Rob Ivy
Salix Ventures Chief Financial Officer Rob Ivy confirmed Friday that Tennessee venture-capital firms find they no longer have a beef with Gov. Phil Bredesen's plan to close a tax loophole.
Ivy, speaking for an ad hoc coalition of venture-capital companies, said the industry no longer sees a threat to its competitiveness in plans by Revenue Commissioner Reagan Farr to redefine tax provisions related to "commercial rents," mainly because VCs "don't operate actual businesses."
The now-waning dispute was centered on changes to law related to family-owned non-corporate entities, more often referred to by its acronym, FONCE. Farr has strongly argued in recent months that the VCs had no reason for concern.
Both Bredesen and Farr have in the past year made clear they saw details in the law providing undeserved shelter for very wealthy individuals who were not intended to have that advantage, which is costing Tennessee $25 million or more each year in foregone revenue.
He said the bill Farr plans to submit "is innocuous to us, in its present form." Consequently, he said there are no plans to retain a lobbyist or take other action, as the companies did a year ago, when they succeeded in delaying consideration of the measure, pending a survey and other study.
Farr (left) told VNC Friday that he has asked to have his FONCE legislation put on notice as a standalone bill, rather than bundling it into the anticipated technical-corrections omnibus bill that emerges near the end of each legislative session.
Farr said that while he believes the bill should be passed as-is, he remains in consultation with legislative leaders, including Sen. Jim Kyle of Memphis, who will sponsor the administration's bill. Earlier this month, Farr published a detailed report on the history of the FONCE provision, including a list of previous loopholes closed.
In the previous FONCE round, Coleman Swenson Booth Managing General Partner Larry Coleman spoke for the coalition. Ivy said Coleman ceded that role to him, largely because Ivy is a former Arthur Andersen tax consultant and was close to the 1998 process which created some legislated advantages for venture-capital firms.
Other resistance to Farr's proposed changes seems to have melted: A spokesman for the National Federation of Independent Businesses recently told VNC that, while NFIB has previously expressed concern regarding Farr's moves, NFIB is now "neutral" in the matter.
The ramifications of the FONCE debate have been numerous: Recently, state Democratic Party Treasurer Bill Freeman was compelled to resign his post, after reports he had contributed to Republican candidates' campaigns and, apparently, because of his persistent resistance to changes in FONCE law. ♦