QSBS Benefits Expanded Under Senate Finance Proposal

On June 16, 2025, the Senate Finance Committee released its own version of proposed legislation following the House's passage of the "One Big Beautiful Bill Act" (H.R. 1). While the House bill did not introduce any changes to Section¹ 1202 for "qualified small business stock" (QSBS), the Senate Finance proposal introduces significant expansions of the tax benefits of QSBS acquired after the date of the enactment of the final legislation.

Summary of Current Law

The QSBS exemption allows noncorporate founders and investors in certain emerging growth companies that are C corporations to exclude up to 100% of the gain upon the sale or exchange of QSBS. The amount of gain eligible for exclusion is limited to the greater of $10 million or 10 times the taxpayer's tax basis in the QSBS (as determined under the QSBS rules) issued by such corporation.