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4 ways Silicon Valley may thrive under Trump

As the 2016 presidential election played out, the tech industry was widely seen as opposed to the prospect of a Trump presidency. And the administration's earliest actions marked by poor execution, willful ignorance of data and xenophobia has done nothing to counter that pessimism. What's more, Trump's "travel ban," and the sweeping crackdown on immigration it portends, casts a significant pall over an industry studded with entrepreneurs and employees who were born far from American shores.

Yet while the tech industry pushes back against these excesses and girds itself for the fights to come, can there be any cause for optimism? Will the forces of reason and moderation prevail so that sounder policies can be pursued? If so — and I prefer in these times to try to focus on optimism wherever I can — we could see some Trump-driven policy changes that will actually help our industry grow.

Here are four.

1. Industry-specific regulation will diminish. 

Donald Trump, unlike any president before him, brings to his new role extensive personal experience with the negative impact of regulation on business operations. There are now thousands of regulations on the books that stymie tech start-ups. For example, the FAA's cautious approach on drone regulation has slowed what could be game-changing ways of delivering goods.

Reducing the regulatory impact on business is one of his stated goals. These potential regulatory changes won't be distributed uniformly and won't benefit all industries, but they will in some cases make things easier for large incumbent businesses.

But even with all that in mind, scrappy tech start-ups, with innovative ideas and the verve to act on them, will be best positioned to take advantage of the new opportunities that will arise with this rollback of regulation.

Action item: In what ways could the federal regulation that is currently impacting your business change or be interpreted differently under the Trump administration? Consider how these changes could open up possibilities for new business and market opportunities.

2. Employee stock options will be more useful incentives. 

Since the wild days of the first dot-com bubble, numerous tax-law changes have made employee Incentive Stock Options (ISOs, often granted in lieu of pay compensation at early stage tech companies) less and less of an inducement for job candidates or tenured employees. ISOs are currently subject to mandatory expiration if they aren't exercised within 10 years.

The loopholes for reissuing or repricing options have been closed. And exercises of ISOs can trigger a massive tax bill under the Alternative Minimum Tax (AMT), regardless of whether the employee sells the shares after exercise. Combine this with the fact that many tech start-ups are staying private longer than they used to and ISOs lose much of their luster for employee retention.

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However, among the many tax-code changes that Trump has endorsed is the complete elimination of the AMT. That would not only do away with a wildly unpopular tax that increasingly hits the middle class but it would also eliminate an option taxing wrinkle that has unduly sidelined an excellent tool for investing early employees in a start-up's growth and success.

Action item: Reconsider the use of ISOs for the equity portion of employee comp, and educate employees about these important changes — and how they stand to benefit — should the AMT be eliminated.

3. Employee classification will be more flexible. 

In late 2016 the Department of Labor implemented regulations that more than doubled the minimum salary for treating employees as non-hourly workers. This means that tech industry employees making less than $47,476 annually must be paid hourly, regardless of their duties and autonomy. Such clock-in-clock-out treatment galls the sort of ambitious workers drawn to the tech field. These people want to contribute whenever and however they can and to be treated as professionals capable of managing their own schedules.

In an industry where work is often interwoven with employees' personal lives and productivity is not linked to time spent working, forcing a rigid structure of hourly reporting can be a particularly bad fit.

However, the implementation of the new rules was frozen by a federal court in December, and it appears unlikely that the Trump administration will be energetic in defending them. Even if the rules survive the court process, look for Trump to roll them back at the first opportunity.

Action item: While it's important to properly classify employees based on their duties (certain roles MUST be hourly, regardless of pay), relief may be coming on the salary side. Talk to a lawyer experienced in wage and hour law to understand your options and the current state of play. Keep in mind that some states impose thresholds higher than those required by federal regulation.

4. Corporate taxes will go down. 

While many focus on cash-burning "unicorns" like Uber and Snap, the reality is that many job creators in the tech space are bootstrapped companies that start generating revenue and achieving profitability earlier than they used to. These companies — and their employees and customers — stand to benefit greatly from Trump's promise to reduce the corporate tax rate from 35 percent to 15 percent.

Cutting the tax burden in half provides an instant boost to the bottom line, or to the customers of these start-ups in the form of lower prices. Start-ups may also benefit from a frothier M&A environment, as lower domestic taxes result in tech giants repatriating large sums of money currently held offshore. Some of that cash will surely be deployed into acquisitions.

Action item: Watch developments closely, as legislation may pass midyear that impacts the entire 2017 tax year, requiring reforecasting or releasing of tax accruals.

There's no question that there are many concerning prospects of a Trump administration. But even as we keep a wary eye on the White House for negative, divisive or dangerous policies, we cannot allow this justifiable concern to blind us. There will be areas where policy will change in ways that benefit our businesses, employees and the communities we serve. The tech industry needs to identify these opportunities and use them to push the envelope of innovation forward.

By Josh King, chief legal officer, online legal marketplace Avvo

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