Bill > HR1199

This bill modifies the tax treatment of gains from qualified small business stock (QSBS) in several key ways. It introduces a phased increase in the exclusion percentage for capital gains based on how long the stock is held: 50% exclusion after 3 years, 75% exclusion after 4 years, and 100% exclusion after 5 years or more. The bill also allows for "tacking" of holding periods when convertible debt instruments are converted into stock, meaning investors can count the time they held the debt instrument toward the stock's holding period. Additionally, the legislation expands the definition of qualified small business stock by removing restrictions that previously limited eligibility to C corporations only, now allowing S corporations and other corporate structures to potentially qualify. The bill also provides clarification on aggregation rules for stock ownership and introduces special provisions for handling passive losses related to small business stock. These changes are designed to incentivize investment in small businesses by offering more generous tax treatment for long-term investments and providing greater flexibility in how such investments can be structured.

Budget and Finance

https://www.congress.gov/bill/119th-congress/house-bill/1199/all-info