By KENT HOOVER
khoover@bizjournals.com

The Kauffman Foundation unveiled the Startup Act, model legislation aimed at creating jobs by helping new businesses grow.

By law, the Kansas City-based foundation can't lobby the federal government, but it can offer ideas on how to reverse a disturbing trend: Startups aren't employing as many people as they used to, and they're adding employees at a slower pace. That's a major reason why job creation is so anemic during this economic recovery, Kauffman contends, since startups account for most net new jobs in the U.S.

Kauffman, which focuses on entrepreneurship, wants to change the conversation about job creation in Washington away from government stimulus programs, big business and even small business in general. Instead, it thinks Washington should encourage the formation and growth of new businesses by taking the following steps:

• Make it easier for foreign-born entrepreneurs to start new businesses in the U.S. The government should award green cards to foreign students that graduate from U.S. universities with degrees in science, technology, engineering and math, and give permanent visas to foreigners who start companies here that employ American workers.

• Help new companies get early-stage financing from outside investors and eventually go public. Investments in small businesses should be exempt from capital gains taxes if they are held for five years -- an incentive that's in place for 2011 but is scheduled to expire in 2012. Taxes on new corporations should be eliminated or reduced during their first years of existence in order to help with cash-flow problems. Plus, shareholders of small companies should be allowed to vote on whether their companies need to comply with the Sarbanes-Oxley Act's costly requirements.

• Accelerate the commercialization of new innovations by reducing the backlog of patent applications and allowing academic researchers to license their innovations on their own instead of going through their universities.

• Reduce regulatory barriers that stand in the way of business formation and growth. Federal regulations should be sunset after 10 years and renewed only if their benefits outweigh their costs. States and localities should be graded on policies that help or hinder the growth of new businesses.

Kauffman's recommendations are heavily weighted toward startups with high growth potential, not mom-and-pop businesses.

"All startups are important, but not everybody is equal," said Robert Litan, Kauffman's vice president of research and policy.