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119-s-695119th CongressWALLET

Small Business Investment Act of 2025

Sponsored By: Senator Cornyn, John [R-TX]

Introduced

Summary

A tiered holding-period QSBS exclusion would replace the fixed 50% gain break with graduated exclusions based on how long stock is held. The bill would cut the minimum holding period to 3 years, add a tacking rule for qualified convertible debt, and extend QSBS treatment beyond C corporations to include S corporations and similar pass-throughs.

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  • Investors and founders: Early-stage investors could qualify for a partial tax exclusion sooner. Stock held 3 years would get a 50% exclusion, 4 years 75%, and 5 or more years 100%.
  • Convertible debt holders: Owners of qualified convertible debt could "tack" the debt holding period onto converted stock. That can help them meet the QSBS holding test faster after conversion.
  • S‑corporation owners and small businesses: The bill removes the C corporation requirement and adjusts aggregation and passive-loss rules so S corporations and their owners can access the QSBS exclusion.

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Bill Overview

Analyzed Economic Effects

4 provisions identified: 4 benefits, 0 costs, 0 mixed.

Lower taxes for qualifying startup gains

If enacted, you would be able to exclude more of your gain when you sell qualifying small business stock. Stock held at least 3 years could exclude 50% of the gain, at least 4 years could exclude 75%, and 5 years or more could exclude 100%. These rules would apply to stock you buy after the law takes effect and remain subject to existing exceptions in the code.

S-corp owners could get stock exclusion

If enacted, stock in some S corporations would be able to meet the small-business stock rules. The bill would remove the rule that the issuer must be a C corporation and would count S‑corp ownership when testing controlled groups. It would also say gains excluded under the rule are not limited by passive-loss rules and that S corporations are judged at the corporate level. These changes would apply to stock bought after the law takes effect.

Count convertible debt toward holding period

If enacted, you would be able to count time you held certain convertible debt toward the holding period for qualifying small business stock when that debt converts to stock. The rule would apply only if the debt was originally issued to you, convertible into the stock, issued after enactment, the company met active-business tests during most of your holding time, and the conversion was the sole way you got the stock with no gain recognized. These conditions limit who can use tacking.

Pre-2010 small business stock AMT preserved

If enacted, qualifying small business stock you bought on or before the 2010 small business jobs law would keep its earlier alternative minimum tax (AMT) treatment. The bill would treat that preservation as if it had been included in the 2010 law. This only affects stock acquired on or before that 2010 date.

Sponsors & CoSponsors

Sponsor

Cornyn, John [R-TX]

TX • R

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

No roll call votes available for this bill.

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