Roger Lee recently published an article in Financial Advisor Magazine exploring three key changes to the Qualified Small Business Stock (QSBS) rules introduced in the One Big Beautiful Bill Act (OBBBA). Roger’s piece discusses the benefits of QSBS, which allows owners and early investors in certain domestic C-corporations to potentially exclude a large portion of capital gains upon sale, as well as what these changes mean for business owners and investors.
As Roger writes, the changes introduced in the OBBBA “expand the benefit considerably by allowing earlier exits, higher exclusion caps and broader eligibility based on company size.” Early investors are now allowed more flexibility on their timing to retain the federal tax savings without forgoing their QSBS benefits, and the OBBBA also increased the “aggregate gross assets” threshold that defines a small business from $50 to $70 million, allowing companies to still issue qualifying stocks in later equity funding rounds.
Roger notes that business owners seeking to leverage QSBS tax benefits “should ensure their companies understand the $75 million asset test and monitor it quarterly, particularly around capital raises or significant asset acquisitions.” He also explains that various state laws may not conform to federal exclusions, so businesses dealing in multiple states still need to run state numbers with federal projections.
Read the full article in Financial Advisor.
