The Big Story: Congress off to rocky start while 2023 startup policy to-do list grows
The 118th Congress is off to a rough start this week as the House remains unable to move forward until they elect a Speaker, which doesn’t bode well for the long and growing list of startup priorities that Congress should act on this year. Those priorities, including key startup issues, like access to talent, broadband availability, and data privacy, must move through a Congress that appears as fraught as ever.
Immigration reform remains a contentious issue on the Hill but a key priority for startups, as foreign-born talent is critical to the U.S. startup ecosystem. Most pressing, Congress needs to enact a legislative fix for Dreamers—immigrants who were brought to the country as children—after court battles last year left the future of the Deferred Action for Childhood Arrivals program uncertain and the livelihoods of hundreds of thousands of immigrants at risk. That includes the many who are overwhelmingly entrepreneurial and critical members of the startup ecosystem. Congress should also advance a startup visa to enable skilled entrepreneurs to start their companies in the U.S.
Another key issue on the congressional to-do list is to fully staff the Federal Communications Commission (FCC) with a Senate confirmation of the recently renominated Gigi Sohn, who the Senate failed to advance last session. Last year, Sohn faced opposition from Senate Republicans and some moderate Democrats, and some lawmakers are signaling continued opposition, insisting that Sohn appear for a third confirmation hearing. Without Sohn, the FCC remains deadlocked and unable to advance key priorities for startups, such as restoring net neutrality rules and improving broadband access.
Congress also has two major privacy items to tackle this year. The first is crafting a federal privacy framework that provides consistent protections for consumers and consistent requirements for startups. Last session, lawmakers came closer than ever to passing a federal privacy framework, but ultimately fell short, leaving a state-by-state patchwork of privacy laws that is growing. Congress must also vote on a controversial surveillance program that is due for reauthorization this year. That program, Section 702 of the Foreign Intelligence Surveillance Act (FISA) allows U.S. Intelligence agencies to obtain communications that it deems tied to “foreign intelligence targets.” FISA has long led to concerns from privacy advocates and foreign trading partners wary of allowing their citizens' data to flow to the U.S., which have contributed to the invalidation of two data transfer agreements with the EU, harming the ability of U.S. startups to operate abroad. As Congress considers reauthorization, it must be cognizant of the potential impacts on international trade and sensitive to the concerns of allies and trading partners around the globe.
The startup policy agenda for 2023 continues to grow, but policymakers will need to get on the same page to achieve any progress. As we enter the new year, we urge policymakers on both sides of the aisle to work together to advance startup priorities and bolster the U.S. economy.
Policy Roundup:
FTC unveils proposal on non-competes. On Thursday, the Federal Trade Commission unveiled a proposed rule that would ban non-compete agreements—contracts that prevent workers from obtaining employment with competitors for a period of time. Non-compete agreements are used across multiple industries, including fields in demand by technology companies, limiting the talent pool for many startups and preventing would-be founders from launching their own businesses, stifling the growth of our innovation ecosystem and the U.S. economy. Without non-compete agreements, startup formation and worker mobility thrive, as evidenced in part by the success of Silicon Valley and the ban on non-compete agreements in California.
Biden proposed rule would increase costs on employers of foreign workers. This week, the Biden administration proposed to increase fees for employment-based visas, which could impact the ability of startups to hire foreign-born talent. Multiple visas would be affected, including the H-1B visa, which many tech companies use to fill STEM talent shortages. Foreign-born talent fills important gaps and many startups turn to or would like to use the H-1B visa program, but visa caps and associated costs already make the program out of reach for many cash-strapped businesses.
Tech industry groups ask Supreme Court to hear case on Texas social media law. This week, the Computer & Communications Industry Association (CCIA) and NetChoice filed a brief to ask the Supreme Court to hear the case against the Texas social media law that prohibits Internet companies with over 50 million users from moderating content based on the user’s “viewpoint.” Last year, a lower court ruling upheld the law, while another federal court invalidated a similar Florida law. The law is enjoined while the Supreme Court appeal proceeds, and several tech advocacy organizations—including Engine—have weighed in throughout the long-running legal battle, citing the importance for Internet companies of all sizes to be able to moderate content on their services as they see fit.
State privacy laws go into effect, growing patchwork. Privacy laws in California and Virginia went into effect at the beginning of the year, adding new obligations for companies that encounter data from residents of those states. Laws in Colorado, Connecticut, and Utah go into effect later this year, and other state legislatures are expected to pass their own privacy laws. The current and growing patchwork of state privacy laws with varying obligations burden startups with confusion and compliance costs.
IRS delays new tax reporting threshold. The IRS recently announced that it is delaying the implementation of a tax reporting threshold that would require individuals who earned at least $600 from online platforms—including eBay, Etsy, and Venmo—to file 1099-K income tax forms, until next year. The threshold was lowered last year from $20,000 to raise tax revenue under the American Rescue Plan. The lower threshold is designed to capture income earned in the gig economy and by freelancers, but the dramatic change risks capturing everyday users of common online platforms, including small sellers and other digital entrepreneurs.
Startup Roundup:
#StartupsEverywhere:
San Francisco, California. Premier pet tech industry leader Petcube keeps owners connected to their pets by providing cameras that offer real-time video monitoring and other interactive features. We spoke to Co-Founder Andrey Klen on the impact of being a Ukrainian-founded company, their experience fighting abusive patent assertions, and how they’ve navigated various privacy rules, both in the U.S. and abroad.
