Bill > S695

This bill modifies the tax treatment of qualified small business stock (QSBS) by making several key changes to the Internal Revenue Code. Specifically, the bill reduces the holding period requirement from 5 years to 3 years and introduces a phased percentage exclusion for capital gains tax: 50% exclusion for stocks held 3 years, 75% exclusion for stocks held 4 years, and 100% exclusion for stocks held 5 years or more. The bill also expands the definition of qualified small business stock by removing the strict requirement that the issuing corporation be a C corporation, thereby potentially allowing more businesses to qualify. Additionally, the bill introduces a new provision allowing investors to "tack" the holding period of convertible debt instruments onto their stock holding period, meaning if an investor converts a qualifying debt instrument into stock, the time they held the debt can count towards the stock's holding period. The bill further clarifies rules for S corporations and provides special treatment for passive loss rules when disposing of small business stock. These changes are aimed at encouraging investment in small businesses by providing more favorable tax treatment for long-term investments in qualifying companies.

Budget and Finance

https://www.congress.gov/bill/119th-congress/senate-bill/695/all-info