Changes to Qualified Small Biz Stock Under the Big Beautiful Bill

Here's a quick summary of the changes to the Qualified Small Business Stock exclusion under the Big Beautiful Bill. Honestly, I don't really see the justification for these changes - they seem like a completely unnecessary giveaway to VCs/angels/other investors, adding more cream to a cake that is creamy enough, but here they are: - Changes apply to stock acquired after enactment of the bill (so July 5th and on) - Previously, you had to hold stock for five years to get the exclusion, now if you 1) hold for 3 years, you can exclude 50% of the gain, 2) hold for 4 years, can exclude 75%, and 3) for five years, can still exclude 100% of gain. - Exclusion amount has been increased from the greater of 10 million or 10x your basis in the stock (usually what you paid for it), to greater of 15 million or 10x your basis - The gross asset test (which is the cut off for whether stock is from a "qualified small business") was moved up from 50 million to 75 million, so a C corp with a value of 75M or less will meet this test - Bill also added an annual inflation adjustment to the 15 million exclusion On the whole, I see these changes as marginal and unlikely to have a large effect on behavior (which is why I see them as an unjustified giveaway). A 10M dollar exclusion v. a 15M exclusion on a speculative investment is not gonna move the needle, although more companies will meet the gross asset test now. That said, for folks here, the change to a 50/75% exclusion for a 3/4 year holding period, may make the decision to go in corporate form for QSBS a bit easier for those who aren't sure they want to commit to a five year holding period. Happy to answer any questions or to review other changes in the bill.