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119-hr-1199119th CongressWALLET

Small Business Investment Act of 2025

Sponsored By: Representative Kustoff, David [R-TN-8]

Introduced

Summary

Expands and speeds up the small-business stock capital-gains exclusion. This bill would let more investors exclude more gain sooner, add holding-period credit for converted debt, and extend the exclusion beyond C corporations.

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  • Small business investors and founders would get a tiered exclusion based on how long they hold qualifying stock. Holding at least 3 years would yield a 50% exclusion, 4 years a 75% exclusion, and 5 years or more a 100% exclusion.
  • Holders of qualified convertible debt who convert without recognizing gain would get holding-period tacking. Time holding the debt would count toward the stock holding requirement making it easier to qualify for the exclusion.
  • Owners of S corporations and other non-C corporations would be able to use the exclusion. The bill adds aggregation rules for S corporations and says gains excluded under this rule are not subject to passive loss limits on disposition.

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Bill Overview

Analyzed Economic Effects

3 provisions identified: 3 benefits, 0 costs, 0 mixed.

Bigger tax break for small business stock

If enacted, your small business stock gain exclusion would rise the longer you hold the stock. Hold at least 3 years = 50% excluded; 4 years = 75%; 5 years or more = 100%. The minimum holding time to qualify would drop to 3 years. If you convert qualifying convertible debt to stock without recognizing gain, your time holding the debt would count toward the stock’s holding period. Gains you exclude under this rule would not be limited by passive activity loss rules on that sale. These changes would generally apply to stock you acquire after enactment, and the conversion rule would apply to debt issued after enactment.

S corporation stock could qualify for exclusion

If enacted, stock in S corporations could count as qualified small business stock. For S corporations, the active business test would be applied at the corporate level. Ownership in S corporations would count when checking controlled‑group limits. These changes would apply to stock acquired after enactment.

Pre-2010 small business stock tax rule

If enacted, a special rule would treat excluded gains as not a tax preference only for stock acquired on or before the enactment date of the Creating Small Business Jobs Act of 2010. It would apply as if it had been part of that 2010 law. This mainly preserves favorable treatment for that older group of holders.

Sponsors & CoSponsors

Sponsor

Kustoff, David [R-TN-8]

TN • R

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

No roll call votes available for this bill.

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