H.R.1199 - Small Business Investment Act of 2025 (119th Congress)
Summary
H.R. 1199, the Small Business Investment Act of 2025, aims to amend the Internal Revenue Code of 1986 to modify the exclusion for gain from qualified small business stock. The bill proposes a phased increase in the exclusion percentage for gains from such stock, reducing the holding period requirement, and allowing gain exclusion for S corporation stock. It also addresses the tacking of holding periods for convertible debt instruments.
Expected Effects
The bill is likely to incentivize investment in small businesses by offering more favorable tax treatment for gains. This could lead to increased capital flowing to small businesses, fostering growth and innovation. The changes related to convertible debt and S corporations may broaden the appeal and accessibility of these tax benefits.
Potential Benefits
- Increased investment in small businesses due to more favorable tax treatment.
- Potential for job creation and economic growth as small businesses expand.
- Simplification of tax rules related to qualified small business stock.
- Encouragement of long-term investment in small businesses with reduced holding period requirements.
- Expanded access to capital for small businesses through convertible debt instruments.
Most Benefited Areas:
Potential Disadvantages
- Potential for increased complexity in tax planning due to phased implementation.
- Possible revenue loss for the government due to increased tax exclusions.
- Risk that the benefits disproportionately favor high-income investors.
- Complexity introduced by the new rules for convertible debt instruments.
- Potential for unintended loopholes or tax avoidance strategies.
Most Disadvantaged Areas:
Constitutional Alignment
The bill falls under the purview of Congress's power to lay and collect taxes, duties, imposts, and excises, as outlined in Article I, Section 8, Clause 1 of the Constitution. The bill aims to promote the general welfare by stimulating economic growth through investment in small businesses, aligning with the principles articulated in the Preamble.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).