The Big Story: Hope fades for pro-startup provisions in U.S. competitiveness package
After months of negotiations, Congress has hit another roadblock to advancing a compromise version of two bills aimed at boosting U.S. competitiveness: the Senate’s United States Innovation and Competition Act (USICA) and the House’s America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act. Now, policymakers look to be moving ahead with a pared back version of the sweeping package to focus on provisions addressing chip manufacturing at the expense of many other innovation-oriented provisions that would benefit startups.
On Wednesday, Secretary of Commerce Gina Raimondo led a briefing session with lawmakers stressing the need for chip funding for national security and urged them—should they not be able to pass a broader package—to prioritize $52 billion in chip manufacturing incentives, significantly trimming the legislation. And Senate Majority Leader Chuck Schumer (D-N.Y.) is reportedly planning to bring a version of the bill focused on emergency funding and tax credits for the semiconductor industry to the Senate floor for a vote next week.
Engine has long discussed the importance of pro-startup provisions in these U.S. competitiveness bills, including those to provide long-term investments in R&D, entrepreneurship, and technological assistance which would support entrepreneurs across the country. Other provisions, like those to bolster high-skilled immigration, create a startup visa, and welcome STEM PhD recipients, would stand to provide significant benefits to the startup ecosystem and U.S. economy by strengthening the numbers of the U.S. STEM talent pool. That said, the language in proposed competition bills has not always been good news for startups—for example, the House-passed version of the bill included the SHOP SAFE Act, which would erect barriers for e-commerce startups. Policymakers looking to bolster domestic innovation and enhance our competitiveness should keep seeking a balanced package that would benefit startups; although it is unclear what future USICA and America COMPETES have and, if it advances, which provisions would make it into a final possible package. The August recess is approaching, and time is quickly running out for policymakers to give startups more support through comprehensive legislation.
Policy Roundup:
House debates NDAA amendments impacting startups. This week, the House passed the 2023 National Defense Authorization Act (NDAA), along with a number of amendments that were submitted by lawmakers, some of which would impact the startup ecosystem. Amendments passed include those concerning the federal contracting process, including one that would require a report on contracts awarded under the Women-Owned Small Business Federal Contracting program and another would prohibit federal funding for contracts or grants to be awarded to companies that require employees to sign “predispute nondicsloure agreements covering sexual harassment or assault as a condition of employment.” Other important provisions include an amendment to require public companies to disclose the racial, ethnic, gender identity, sexual orientation, and veteran status of their board members and executive officers. It also establishes an advisory group at the SEC to study corporate diversity. Another amendment would protect “documented DREAMers”—the dependent children of green card applicants and “long-term dependent children of employment based non-immigrants from aging out of our legal immigration system.” This population is a critical source of talent for our startup ecosystem, many of whom have spent their lives living and gaining an education in the U.S.
House Energy and Commerce plans full committee privacy markup. The House Energy and Commerce committee will reportedly hold a markup next week to consider and vote on several bills, including the American Data Privacy and Protection Act (ADPPA). If passed, the ADPPA would create the first comprehensive federal privacy framework, which, for the most part, would replace the state patchwork of privacy laws that has emerged since 2018. As Engine has previously written, startups need a federal framework that creates consistent obligations and consumer protections.
OECD says global tax deal delayed. The OECD announced this week that the long-awaited global tax reform plan agreed to in October 2021 is expected to be delayed until 2024. The plan, which would create a global minimum tax in exchange for a suspension of discriminatory digital services taxes (DSTs), faces an uphill battle as acquiescing legislatures struggle to adopt the framework in their own countries. It is unclear whether officials will extend the timeline even further, or if the pause on DSTs will expire, with countries again imposing the taxes on large, mostly American technology companies.
The 411 on SPACs. Special Purpose Acquisition Companies, otherwise known as SPACs, continue to receive attention, both in Congress and at the SEC. These publicly traded vehicles that other companies use as a way to go public and are seen as a faster and less costly way to go public, but they have also been met with criticism, with many SPACs performing poorly. Read more about the state of SPACs in our new blog post and what the outlook means for the startup ecosystem.
Two years without a transatlantic data transfer framework. Saturday marks two years since the Court of Justice of the European Union invalidated the agreement known as Privacy Shield, which enabled data flows between the U.S. and EU and was overwhelmingly relied upon by startups. As a result of the decision, startups have lost customers, faced increased costs, and experienced barriers to serving EU customers. And with recent actions from regulators in the EU threatening other (more expensive) methods for data transfer (called Standard Contractual Clauses), restoring Privacy Shield should be a priority for policymakers. President Biden was expected to issue an executive order as part of an announced framework earlier this year to restore Privacy Shield as a legal data transfer mechanism. However, that order has been delayed, pushing the expected timeline for restoring transatlantic data flows well into 2023.
FTC cracking down on illegal sharing of data. The Federal Trade Commission (FTC) this week renewed its promise to protect consumer privacy following the recent Supreme Court decision overturning the consititutional right to an abortion. In the wake of the decision, privacy advocates have raised concerns over the potential weaponization of data via period tracking apps and other online services against those seeking abortion care. Kristen Cohen, the agency’s acting associate director of the Division of Privacy and Identity Protection, wrote a new blog highlighting the agency is “committed to fully enforcing the law” against sharing sensitive geolocation and healthdata. A federal data privacy framework could additionally help mitigate such concerns while boosting overall consumer trust in the Internet ecosystem and creating consistent obligations for startups.
Startup Roundup:
#StartupsEverywhere: Minneapolis, Minnesota. Nucleic Sensing Systems (NS²) is an environmentally-focused company that employs biological sensing technology to monitor the presence of species in aquatic ecosystems. CEO Ed Rudberg spoke with us about his company, his experience with Small Business and Innovation Research (SBIR) funding, and policy areas of concern for startups and startup founders such as access to talent and affordable healthcare.
