WASHINGTON - The IRS reform bill passed by the Senate last week contains a provision that will improve the ability of venture capital partnerships to recycle funds into new companies.

The Taxpayers Relief Act of 1997 allows a tax-free roll-over of qualifying small business stock held for at least six months into another qualifying small business stock. However, according to the National Venture Capital Association and the Biotechnology Industry Organization, the provision was flawed because it applied only to individuals and did not specifically provide roll-over benefits to individuals who hold qualified stock indirectly through a partnership such as a venture fund.