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I'd recommend reading the proposed provisions themselves directly from the Ways & Means Committee instead of the main article urging action: https://www.advanta

I'd recommend reading the proposed provisions themselves directly from the Ways & Means Committee instead of the main article urging action: https://www.advantaira.com/wp-content/uploads/2021/09/WM-Tax-Title-Section-by-Section-Explanation-9.13.21-002.pdf https://www.advantaira.com/wp-content/uploads/2021/09/WM-Tax... Highlights: 1. You can't add new contributions to tax-advantaged accounts if their total value exceeds $10 million and you make over $400K for single filers, amounts indexed to inflation. 2. There are required minimum distributions if you have tax-advantaged accounts over $10M and make over $400k. There's a more rapid drain if you have over $20M. 3. Closes the backdoor Roth IRA (https://www.bogleheads.org/wiki/Backdoor_Roth https://www.bogleheads.org/wiki/Backdoor_Roth) only for people making over $400k. Closes the mega backdoor (https://www.bogleheads.org/wiki/Mega-backdoor_Roth https://www.bogleheads.org/wiki/Mega-backdoor_Roth) for everybody. 4. Prohibits you from using a tax advantaged account to invest in securities that require "accredited investor" status (hedge funds, etc). You also can't use the tax advantaged account to invest in businesses where you have 50% or more of an interest. Unless you're super rich, were using a tax advantaged account to invest in your business, or were using the mega backdoor, which isn't available to everyone and still does require a pretty high income (investing more than ~$20k/year in a 401k), this doesn't really impact you. You can also still do whatever you want in a taxable account, so to me this just seems like a roundabout way of increasing taxes on wealthy people's investments. I do wonder how much revenue this will raise, though. I can't imagine there are a ton of people with retirement balances over $10M. Maybe the expectation is that revenue will compound over time as more and more assets are held in taxable accounts. EDIT: I think I was wrong about the backdoor Roth still being available to folks making under $400k (point 3) since you can't convert any after tax funds to a Roth with the proposal. So, this does affect people above the Roth ceiling ($140K single income, $208K married), if you were maxing out pretax contributions and making after-tax conversions to a Roth. I think pretax contributions to a traditional IRA for 401k can still get converted to a Roth.

mmd45 5y ago
The killer is the "The bill also prevents investing in an entity in which the IRA owner is an officer." which is generally how the checkbook IRA is structured (IRA owner is the Manager of the single member LLC that is wholly owned by the IRA). Sec. 138314. Prohibition of Investment of IRA Assets in Entities in Which the Owner Has a Substantial Interest. To prevent self-dealing, under current law prohibited transaction rules, an IRA owner cannot invest his or her IRA assets in a corporation, partnership, trust, or estate in which he or she has a 50 percent or greater interest. However, an IRA owner can invest IRA assets in a business in which he or she owns, for example, one-third of the business while also acting as the CEO. The bill adjusts the 50 percent threshold to 10 percent for investments that are not tradable on an established securities market, regardless of whether the IRA owner has a direct or indirect interest. The bill also prevents investing in an entity in which the IRA owner is an officer. Further, the bill modifies the rule to be an IRA requirement, rather than a prohibited transaction rule (i.e., in order to be an IRA, it must meet this requirement). This section generally takes effect for tax years beginning after December 31, 2021, but there is a 2-year transition period for IRAs already holding these investments
- idiotsecant 5y ago
  This is the killer, indeed. Checkbook IRAs are amazing retirement tools if you're interested in using some of your retirement money in high-risk, high-reward investments. My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. It's hard to see this as anything other than removing all the peasants from the market so that the big dogs can have it to themselves.
  - nodesocket 5y ago
    > My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. I have a single member LLC and a simplified employee pension plan (SEP), but don't understand how one gets crypto into a SEP without buying something like Grayscale (GBTC) through the open stock market.
    - tylersmith 5y ago
      The LLC creates an account at e.g. Gemini. Talk with your trustee about it first.
      - nodesocket 5y ago
        trustee? Lol, it is just me. I thought that crypto exchanges don't let business entities open accounts. If they do, if I open an account at Gemini under my LLC how then do I get that into my SEP though?
        tylersmith 5y ago
        A SEP, and other retirement accounts, are trusts. The manager of your accounts is the trustee of those accounts. It can't be just you with a retirement account, there is always a trustee. E.g. Mass Mutual Trust Company, Directed Trust Company, etc The LLC is owned by the SEP (the trust). Anything owned by the LLC is in the SEP.
        5y ago
joshgachnang 5y ago
Honestly they should close the backdoor Roth and update the Roth income rules to stop requiring the backdoor Roth. It's annoying to use it as is. Getting rid of the mega backdoor seems like a no brainer since it's a clear loophole. Or if you want to keep something similar, change the Roth contribution limits for everyone.
- majora2007 5y ago
  This is what I'm most bumed on with the mega backdoor and backdoor, but closing them and just opening them for everyone would be ideal. Because you can still contribute to Roth regardless on income level if you know about backdoor, so it makes sense just to legalize across the board.
- lotsofpulp 5y ago
  They should close 401k and all other tax advantaged retirement accounts, and just have regular IRA and Roth IRA for everyone, and remove employers from the equation.
  - the_optimist 5y ago
    This is the best idea. Having employers involved in healthcare and retirement is really crummy. These vestiges of history have been corrupted into massive handouts to the insurance and financial industries, and there is no reason they need to exist.
    - BeFlatXIII 5y ago
      My #1 problem with the Affordable Care Act was that it tried to mandate universal health insurance coverage while leaving employer-sponsored insurance in place. If they were going to mandate that we urinate our money away to insurance companies (rather than assess an honest tax for single-payer healthcare), they should have prohibited employer-sponsored healthcare benefits to force everyone into the same insurance pool.
      - 5y ago
c54 5y ago
This seems… fine? And a lot less FUD-y than the original article. I find that talk of the “freedoms” being taken away often is propaganda by the corporate interest youre paying to exercise the supposed freedom
- deleted 5y ago
  [deleted]
- Grim-444 5y ago
  Well you can't deny that options are being taken away for a portion of citizens. I stopped doing more than the minimum match into my 401K a long time ago because I could no longer trust that in 30, 40, 50 years nobody wouldn't have come after it as an easy target. It's kind of like gun control (which isn't a good analogy since it's too politically charged) - you're pointing at one restriction and saying "hey, it's not the end of the world, you can still own guns, this probably doesn't even affect you personally", but then a new restriction, law, permit, tax, ruling, regulation, is passed every 6 months from that point on every year for decades on end, every time pointing to the change as just a small little thing that probably only affects a small portion of people. Every time gaining more and more precedence for more restrictions and overall adding them all up having a much more massive impact than just a small change that only affects certain people.
  - kelseyfrog 5y ago
    If any restriction is intolerable then what remains?
    - nybble41 5y ago
      Liberty.
      - kelseyfrog 5y ago
        Not sure, I follow. That doesn't make any sense.
2arrs2ells 5y ago
Re: revenue generated, if this [1] article about Peter Thiel's $5bn Roth is correct, that's $1bn+ in lost long term capital gains tax on him alone! (That said, I'm guessing the intent of the provision is more about fairness/eliminating a loophole for the wealthy than strictly generating revenue). [1] https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank https://www.propublica.org/article/lord-of-the-roths-how-tec...
- loourr 5y ago
  Roth IRAs are pre tax so even if this bill passes Peter Thiel won't have to pay any taxes on his $5B.
  - CPLX 5y ago
    This comment is factually inaccurate. Roth IRA's are post-tax, that's the whole point of them. You put money in after paying tax and then you're done, when you withdraw for retirement it's tax free. If this bill passes as written he would actually be forced to divest assets out of his Roth IRA and then pay taxes on them now. It's a really substantive change, hence the discussion.
    - loourr 5y ago
      You're right that I mixed up pre and post but that's exactly the point. It's post tax so he's ALREADY PAID TAXs and therefor will pay nothing when the funds are distributed.
    - nybble41 5y ago
      > If this bill passes as written he would actually be forced to divest assets out of his Roth IRA and then pay taxes on them now. He would be forced to sell his current assets in the IRA, yes—but what prevents him from rolling over the proceeds into another asset? As long as all the funds remain in a Roth IRA until retirement age there shouldn't be any taxes due to the reinvestment, now or later. Or are you implying that he would choose to take the tax hit of losing the Roth status rather than sell the assets?
wanderingstan 5y ago
Thank you for the succinct summary. I agree it all seems reasonable, even too modest. Having these basic guardrails in place may be a good first step, and in the future the thresholds could be dropped below $10MM and 400K.
CincinnatiMan 5y ago
I think you may be wrong on point 3. > Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021. This makes it sound like backdoor will be stopped for everyone, since after-tax contributions to a (Traditional) IRA are a necessary step.
- mariojv 5y ago
  You are right, I missed that. This does mean there's an impact on folks making above the Roth income limit but below $400k. Updated the post, thanks
- FooBarBizBazz 5y ago
  If this happens, maybe 401k providers will lose business. People often have reasonably large traditional 401ks, which they don't roll over to traditional IRAs, because having traditional IRAs interferes with the backdoor Roth (and they don't want to do a Roth conversion, because that would be a taxable event). But if backdoor Roths went away, then there'd be no reason not to roll a traditional 401k into a traditional IRA. Brokerages like Fidelity and Schwab would win, as people brought their assets over, and 401k providers would lose, since now people would take their money out as soon as they switched jobs.
  - paulclinger 5y ago
    The rule of 55 (https://www.thebalance.com/what-is-the-rule-of-55-2894280 https://www.thebalance.com/what-is-the-rule-of-55-2894280) may still apply, which relies on a separate 401k balance.
  - nullc 5y ago
    The 401ks will still enjoy better legal protections in states that don't absolutely protect IRAs.
ryandrake 5y ago
> 3. Closes the backdoor Roth IRA (https://www.bogleheads.org/wiki/Backdoor_Roth https://www.bogleheads.org/wiki/Backdoor_Roth) only for people making over $400k. Closes the mega backdoor (https://www.bogleheads.org/wiki/Mega-backdoor_Roth https://www.bogleheads.org/wiki/Mega-backdoor_Roth) for everybody. Just a nit-pick of your analysis. The proposed legislation closes both the megabackdoor Roth (employee after-tax contributions) and backdoor Roth (prohibition on IRA contributions from being converted) regardless of income level: "Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level" ...which, depending on what you consider a tax increase, appears to run contrary to President Biden's promise to not increase taxes for anyone making less than $400K. This gutting of IRA conversions seems like the only piece of the pie that hurts the middle class, although arguably the upper end of the middle class who have the means to set aside more than the $19K 401(k) max per year.
- mariojv 5y ago
  Yeah, you're totally right. Updated the post.
- paulclinger 5y ago
  I'm curious why would this increase taxes if those contributions that get converted are after-tax anyway and the amount that gets taxed shouldn't change?
  - ryandrake 5y ago
    It admittedly depends on a rather broad definition of a tax increase. The future gains from those contributions invested today are not subject to taxes due to them being in a Roth account, but with this legislation, one would need to make those gains outside of a Roth, and thus those gains would be subject to taxes.
CPLX 5y ago
> I can't imagine there are a ton of people with retirement balances over $10M. Probably not a ton of people. But there might well be a ton of money in these accounts. https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/ https://www.theatlantic.com/politics/archive/2012/09/whats-r...
loourr 5y ago
This just isn't true. The bill also prevents you from investing in any private company of which you are a member, AKA a startup you work at. It also prevents you from any deals requiring you to be an accredited investor which means any Reg D which is how almost all early stage tech companies raise money.
- ska 5y ago
  Does it restrict you from doing those things, or only restrict you from doing it in a tax-free/tax-advantaged way?
  - loourr 5y ago
    It restricts you from doing them within retirement accounts. But the purpose of retirement accounts is to effectively save for retirement. Congress is basically saying we want you not to need us but we don't actually want you doing well with your investments.
    - ska 5y ago
      > It restricts you from doing them within retirement accounts. I'm not saying it's a good bill (no opinion, not enough info), but it isn't prima-facie crazy for congress to revisit retirement plans if they have evidence they are often being used for other purposes, or ineffectively.
    - twic 5y ago
      > the purpose of retirement accounts is to effectively save for retirement Investing in the company which also pays your wages is a Texas hedge, and as such a terrible way to save for retirement, so this sounds like a good change.
    - ac29 5y ago
      > we don't actually want you doing well with your investments No, its saying if you do well on certain types of investments you need to pay tax. If you do poorly on your investments and lose money, you'd actually want them in a taxable account (because you can count the losses against other gains).
wintermutestwin 5y ago
>and still does require a pretty high income (investing more than ~$20k/year in a 401k) Nearing retirement, earning low income now and have a significant amount of savings in non-retirement accounts = Closing the megaBD Roth screws me. What should really happen is that anyone with net worth < a reasonable threshold should be able to simply roth what ever the fuck they want without having to figure out these annoyingly complex tax rules.
lmeyerov 5y ago
The big thing I heard about is this ends QSBS, which stinks for founders: something like 15-20%+ of your company's value. Worse, it's a retroactive tax, meaning taxing founders who started the journey with that in mind. Talk about rich senators punching down vs encouraging company formation! PSA: If you are starting a US company and haven't heard of QSBS.. look into it at the federal + state levels, as that's a good chunk of your potential net worth.
- CPLX 5y ago
  As a founder I'll certainly take advantage of QSBS if it's relevant to me in the future. But let's not delude ourselves -- it's wildly unfair as a tax break. The primary use of it seems to be allowing angel investors to literally pay no taxes whatsoever on millions of dollars in windfall profits.
  - lmeyerov 5y ago
    I'm not sure why it's unfair for first-time founders. STEM founders are largely better off not innovating and instead helping FB sell ads. Tax incentivizes like QSBS for companies, especially bootstrapped co's, help. Job creation & technology invention is why the gov already has direct programs to give tax money directly to startups (SBIR, R&D tax credit, ...), and this is an extension of that encouragement. We need more, not less -- otherwise it'll push even more to the concentration of VC-funded fintech startups and FAANG. I would agree that QSBS support for the already-rich can be less effective -- your case of angels. I'd rather see improvements on the capping structure, vs pushing incentives even more (15-30%!) to working for FAANGs.

mmd45 5y ago

The killer is the "The bill also prevents investing in an entity in which the IRA owner is an officer." which is generally how the checkbook IRA is structured (IRA owner is the Manager of the single member LLC that is wholly owned by the IRA). Sec. 138314. Prohibition of Investment of IRA Assets in Entities in Which the Owner Has a Substantial Interest. To prevent self-dealing, under current law prohibited transaction rules, an IRA owner cannot invest his or her IRA assets in a corporation, partnership, trust, or estate in which he or she has a 50 percent or greater interest. However, an IRA owner can invest IRA assets in a business in which he or she owns, for example, one-third of the business while also acting as the CEO. The bill adjusts the 50 percent threshold to 10 percent for investments that are not tradable on an established securities market, regardless of whether the IRA owner has a direct or indirect interest. The bill also prevents investing in an entity in which the IRA owner is an officer. Further, the bill modifies the rule to be an IRA requirement, rather than a prohibited transaction rule (i.e., in order to be an IRA, it must meet this requirement). This section generally takes effect for tax years beginning after December 31, 2021, but there is a 2-year transition period for IRAs already holding these investments

idiotsecant 5y ago
This is the killer, indeed. Checkbook IRAs are amazing retirement tools if you're interested in using some of your retirement money in high-risk, high-reward investments. My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. It's hard to see this as anything other than removing all the peasants from the market so that the big dogs can have it to themselves.
- nodesocket 5y ago
  > My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. I have a single member LLC and a simplified employee pension plan (SEP), but don't understand how one gets crypto into a SEP without buying something like Grayscale (GBTC) through the open stock market.
  - tylersmith 5y ago
    The LLC creates an account at e.g. Gemini. Talk with your trustee about it first.
    - nodesocket 5y ago
      trustee? Lol, it is just me. I thought that crypto exchanges don't let business entities open accounts. If they do, if I open an account at Gemini under my LLC how then do I get that into my SEP though?
      - tylersmith 5y ago
        A SEP, and other retirement accounts, are trusts. The manager of your accounts is the trustee of those accounts. It can't be just you with a retirement account, there is always a trustee. E.g. Mass Mutual Trust Company, Directed Trust Company, etc The LLC is owned by the SEP (the trust). Anything owned by the LLC is in the SEP.
      - 5y ago

joshgachnang 5y ago

Honestly they should close the backdoor Roth and update the Roth income rules to stop requiring the backdoor Roth. It's annoying to use it as is. Getting rid of the mega backdoor seems like a no brainer since it's a clear loophole. Or if you want to keep something similar, change the Roth contribution limits for everyone.

majora2007 5y ago
This is what I'm most bumed on with the mega backdoor and backdoor, but closing them and just opening them for everyone would be ideal. Because you can still contribute to Roth regardless on income level if you know about backdoor, so it makes sense just to legalize across the board.
lotsofpulp 5y ago
They should close 401k and all other tax advantaged retirement accounts, and just have regular IRA and Roth IRA for everyone, and remove employers from the equation.
- the_optimist 5y ago
  This is the best idea. Having employers involved in healthcare and retirement is really crummy. These vestiges of history have been corrupted into massive handouts to the insurance and financial industries, and there is no reason they need to exist.
  - BeFlatXIII 5y ago
    My #1 problem with the Affordable Care Act was that it tried to mandate universal health insurance coverage while leaving employer-sponsored insurance in place. If they were going to mandate that we urinate our money away to insurance companies (rather than assess an honest tax for single-payer healthcare), they should have prohibited employer-sponsored healthcare benefits to force everyone into the same insurance pool.
    - 5y ago

c54 5y ago

This seems… fine? And a lot less FUD-y than the original article. I find that talk of the “freedoms” being taken away often is propaganda by the corporate interest youre paying to exercise the supposed freedom

deleted 5y ago
[deleted]
Grim-444 5y ago
Well you can't deny that options are being taken away for a portion of citizens. I stopped doing more than the minimum match into my 401K a long time ago because I could no longer trust that in 30, 40, 50 years nobody wouldn't have come after it as an easy target. It's kind of like gun control (which isn't a good analogy since it's too politically charged) - you're pointing at one restriction and saying "hey, it's not the end of the world, you can still own guns, this probably doesn't even affect you personally", but then a new restriction, law, permit, tax, ruling, regulation, is passed every 6 months from that point on every year for decades on end, every time pointing to the change as just a small little thing that probably only affects a small portion of people. Every time gaining more and more precedence for more restrictions and overall adding them all up having a much more massive impact than just a small change that only affects certain people.
- kelseyfrog 5y ago
  If any restriction is intolerable then what remains?
  - nybble41 5y ago
    Liberty.
    - kelseyfrog 5y ago
      Not sure, I follow. That doesn't make any sense.

2arrs2ells 5y ago

Re: revenue generated, if this [1] article about Peter Thiel's $5bn Roth is correct, that's $1bn+ in lost long term capital gains tax on him alone! (That said, I'm guessing the intent of the provision is more about fairness/eliminating a loophole for the wealthy than strictly generating revenue). [1] https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank https://www.propublica.org/article/lord-of-the-roths-how-tec...

loourr 5y ago
Roth IRAs are pre tax so even if this bill passes Peter Thiel won't have to pay any taxes on his $5B.
- CPLX 5y ago
  This comment is factually inaccurate. Roth IRA's are post-tax, that's the whole point of them. You put money in after paying tax and then you're done, when you withdraw for retirement it's tax free. If this bill passes as written he would actually be forced to divest assets out of his Roth IRA and then pay taxes on them now. It's a really substantive change, hence the discussion.
  - loourr 5y ago
    You're right that I mixed up pre and post but that's exactly the point. It's post tax so he's ALREADY PAID TAXs and therefor will pay nothing when the funds are distributed.
  - nybble41 5y ago
    > If this bill passes as written he would actually be forced to divest assets out of his Roth IRA and then pay taxes on them now. He would be forced to sell his current assets in the IRA, yes—but what prevents him from rolling over the proceeds into another asset? As long as all the funds remain in a Roth IRA until retirement age there shouldn't be any taxes due to the reinvestment, now or later. Or are you implying that he would choose to take the tax hit of losing the Roth status rather than sell the assets?

wanderingstan 5y ago

Thank you for the succinct summary. I agree it all seems reasonable, even too modest. Having these basic guardrails in place may be a good first step, and in the future the thresholds could be dropped below $10MM and 400K.

CincinnatiMan 5y ago

I think you may be wrong on point 3. > Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021. This makes it sound like backdoor will be stopped for everyone, since after-tax contributions to a (Traditional) IRA are a necessary step.

mariojv 5y ago
You are right, I missed that. This does mean there's an impact on folks making above the Roth income limit but below $400k. Updated the post, thanks
FooBarBizBazz 5y ago
If this happens, maybe 401k providers will lose business. People often have reasonably large traditional 401ks, which they don't roll over to traditional IRAs, because having traditional IRAs interferes with the backdoor Roth (and they don't want to do a Roth conversion, because that would be a taxable event). But if backdoor Roths went away, then there'd be no reason not to roll a traditional 401k into a traditional IRA. Brokerages like Fidelity and Schwab would win, as people brought their assets over, and 401k providers would lose, since now people would take their money out as soon as they switched jobs.
- paulclinger 5y ago
  The rule of 55 (https://www.thebalance.com/what-is-the-rule-of-55-2894280 https://www.thebalance.com/what-is-the-rule-of-55-2894280) may still apply, which relies on a separate 401k balance.
- nullc 5y ago
  The 401ks will still enjoy better legal protections in states that don't absolutely protect IRAs.

ryandrake 5y ago

> 3. Closes the backdoor Roth IRA (https://www.bogleheads.org/wiki/Backdoor_Roth https://www.bogleheads.org/wiki/Backdoor_Roth) only for people making over $400k. Closes the mega backdoor (https://www.bogleheads.org/wiki/Mega-backdoor_Roth https://www.bogleheads.org/wiki/Mega-backdoor_Roth) for everybody. Just a nit-pick of your analysis. The proposed legislation closes both the megabackdoor Roth (employee after-tax contributions) and backdoor Roth (prohibition on IRA contributions from being converted) regardless of income level: "Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level" ...which, depending on what you consider a tax increase, appears to run contrary to President Biden's promise to not increase taxes for anyone making less than $400K. This gutting of IRA conversions seems like the only piece of the pie that hurts the middle class, although arguably the upper end of the middle class who have the means to set aside more than the $19K 401(k) max per year.

mariojv 5y ago
Yeah, you're totally right. Updated the post.
paulclinger 5y ago
I'm curious why would this increase taxes if those contributions that get converted are after-tax anyway and the amount that gets taxed shouldn't change?
- ryandrake 5y ago
  It admittedly depends on a rather broad definition of a tax increase. The future gains from those contributions invested today are not subject to taxes due to them being in a Roth account, but with this legislation, one would need to make those gains outside of a Roth, and thus those gains would be subject to taxes.

CPLX 5y ago

> I can't imagine there are a ton of people with retirement balances over $10M. Probably not a ton of people. But there might well be a ton of money in these accounts. https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/ https://www.theatlantic.com/politics/archive/2012/09/whats-r...

loourr 5y ago

This just isn't true. The bill also prevents you from investing in any private company of which you are a member, AKA a startup you work at. It also prevents you from any deals requiring you to be an accredited investor which means any Reg D which is how almost all early stage tech companies raise money.

ska 5y ago
Does it restrict you from doing those things, or only restrict you from doing it in a tax-free/tax-advantaged way?
- loourr 5y ago
  It restricts you from doing them within retirement accounts. But the purpose of retirement accounts is to effectively save for retirement. Congress is basically saying we want you not to need us but we don't actually want you doing well with your investments.
  - ska 5y ago
    > It restricts you from doing them within retirement accounts. I'm not saying it's a good bill (no opinion, not enough info), but it isn't prima-facie crazy for congress to revisit retirement plans if they have evidence they are often being used for other purposes, or ineffectively.
  - twic 5y ago
    > the purpose of retirement accounts is to effectively save for retirement Investing in the company which also pays your wages is a Texas hedge, and as such a terrible way to save for retirement, so this sounds like a good change.
  - ac29 5y ago
    > we don't actually want you doing well with your investments No, its saying if you do well on certain types of investments you need to pay tax. If you do poorly on your investments and lose money, you'd actually want them in a taxable account (because you can count the losses against other gains).

wintermutestwin 5y ago

>and still does require a pretty high income (investing more than ~$20k/year in a 401k) Nearing retirement, earning low income now and have a significant amount of savings in non-retirement accounts = Closing the megaBD Roth screws me. What should really happen is that anyone with net worth < a reasonable threshold should be able to simply roth what ever the fuck they want without having to figure out these annoyingly complex tax rules.

lmeyerov 5y ago

The big thing I heard about is this ends QSBS, which stinks for founders: something like 15-20%+ of your company's value. Worse, it's a retroactive tax, meaning taxing founders who started the journey with that in mind. Talk about rich senators punching down vs encouraging company formation! PSA: If you are starting a US company and haven't heard of QSBS.. look into it at the federal + state levels, as that's a good chunk of your potential net worth.

CPLX 5y ago
As a founder I'll certainly take advantage of QSBS if it's relevant to me in the future. But let's not delude ourselves -- it's wildly unfair as a tax break. The primary use of it seems to be allowing angel investors to literally pay no taxes whatsoever on millions of dollars in windfall profits.
- lmeyerov 5y ago
  I'm not sure why it's unfair for first-time founders. STEM founders are largely better off not innovating and instead helping FB sell ads. Tax incentivizes like QSBS for companies, especially bootstrapped co's, help. Job creation & technology invention is why the gov already has direct programs to give tax money directly to startups (SBIR, R&D tax credit, ...), and this is an extension of that encouragement. We need more, not less -- otherwise it'll push even more to the concentration of VC-funded fintech startups and FAANG. I would agree that QSBS support for the already-rich can be less effective -- your case of angels. I'd rather see improvements on the capping structure, vs pushing incentives even more (15-30%!) to working for FAANGs.