Us Congress 2025-2026 Regular Session

Us Congress Senate Bill SB695 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	II
2	2	119THCONGRESS
3	3	1
4	4	STSESSION S. 695
5	5	To amend the Internal Revenue Code of 1986 to modify the exclusion for
6	6	gain from qualified small business stock.
7	7	IN THE SENATE OF THE UNITED STATES
8	8	FEBRUARY24, 2025
9	9	Mr. C
10	10	ORNYNintroduced the following bill; which was read twice and referred
11	11	to the Committee on Finance
12	12	A BILL
13	13	To amend the Internal Revenue Code of 1986 to modify
14	14	the exclusion for gain from qualified small business stock.
15	15	Be it enacted by the Senate and House of Representa-1
16	16	tives of the United States of America in Congress assembled, 2
17	17	SECTION 1. SHORT TITLE. 3
18	18	This Act may be cited as the ‘‘Small Business Invest-4
19	19	ment Act of 2025’’. 5
20	20	SEC. 2. PHASED INCREASE IN EXCLUSION FOR GAIN FROM 6
21	21	QUALIFIED SMALL BUSINESS STOCK. 7
22	22	(a) I
23	23	NGENERAL.—Section 1202(a)(1) of the Internal 8
24	24	Revenue Code of 1986 is amended— 9
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27	27	•S 695 IS
28	28	(1) by striking ‘‘50 percent’’ and inserting ‘‘the 1
29	29	applicable percentage’’, and 2
30	30	(2) by striking ‘‘held for more than 5 years’’ 3
31	31	and inserting ‘‘held for at least 3 years’’. 4
32	32	(b) A
33	33	PPLICABLEPERCENTAGE.—Section 1202(a) of 5
34	34	such Code is amended by adding at the end the following 6
35	35	new paragraph: 7
36	36	‘‘(5) A
37	37	PPLICABLE PERCENTAGE .—Except as 8
38	38	provided in paragraphs (3) and (4), the applicable 9
39	39	percentage under paragraph (1) shall be determined 10
40	40	under the following table: 11
41	41	‘‘Years stock held:
42	42	Applicable
43	43	percentage:
44	44	3 years ...................................................................................... 50%
45	45	4 years ...................................................................................... 75%
46	46	5 years or more ........................................................................ 100%’’.
47	47	(c) CONTINUEDTREATMENT ASNOTITEM OFTAX 12
48	48	P
49	49	REFERENCE.— 13
50	50	(1) I
51	51	N GENERAL.—Section 57(a)(7) of such 14
52	52	Code is amended by striking ‘‘An amount’’ and in-15
53	53	serting ‘‘In the case of stock acquired on or before 16
54	54	the date of the enactment of the Creating Small 17
55	55	Business Jobs Act of 2010, an amount’’. 18
56	56	(2) C
57	57	ONFORMING AMENDMENT .—Section 19
58	58	1202(a)(4) of such Code is amended— 20
59	59	(A) by striking ‘‘, and’’ at the end of sub-21
60	60	paragraph (B) and inserting a period, and 22
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63	63	•S 695 IS
64	64	(B) by striking subparagraph (C). 1
65	65	(d) O
66	66	THERCONFORMINGAMENDMENTS.— 2
67	67	(1) Section 1202(a)(4) of such Code is amended 3
68	68	by inserting ‘‘and before the date of the enactment 4
69	69	of the Small Business Investment Act of 2025’’ after 5
70	70	‘‘Act of 2010’’. 6
71	71	(2) Paragraphs (3) and (4) of section 1202(a) 7
72	72	of such Code are each amended by inserting ‘‘held 8
73	73	for more than 5 years and’’ after ‘‘In the case of 9
74	74	qualified small business stock’’. 10
75	75	(3) Section 1202(a)(3)(A) of such Code is 11
76	76	amended to read as follows: 12
77	77	‘‘(A) the applicable percentage under para-13
78	78	graph (1) shall be 75 percent, and’’. 14
79	79	(4) Section 1202(a)(4)(A) of such Code is 15
80	80	amended to read as follows: 16
81	81	‘‘(A) the applicable percentage under para-17
82	82	graph (1) shall be 100 percent, and’’. 18
83	83	(5) Section 1202(b)(2) of such Code is amend-19
84	84	ed by striking ‘‘more than 5 years’’ and inserting 20
85	85	‘‘at least 3 years’’. 21
86	86	(6) Section 1202(g)(2)(A) of such Code is 22
87	87	amended by striking ‘‘more than 5 years’’ and in-23
88	88	serting ‘‘at least 3 years’’. 24
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91	91	•S 695 IS
92	92	(7) Section 1202(j)(1)(A) of such Code is 1
93	93	amended by striking ‘‘more than 5 years’’ and in-2
94	94	serting ‘‘at least 3 years’’. 3
95	95	(e) E
96	96	FFECTIVEDATE.— 4
97	97	(1) I
98	98	N GENERAL.—Except as provided in para-5
99	99	graph (2), the amendments made by this section 6
100	100	shall apply to stock acquired after the date of the 7
101	101	enactment of this Act. 8
102	102	(2) C
103	103	ONTINUED TREATMENT AS NOT ITEM OF 9
104	104	TAX PREFERENCE.—The amendment made by sub-10
105	105	section (c) shall take effect as if included in the en-11
106	106	actment of section 2011 of the Creating Small Busi-12
107	107	ness Jobs Act of 2010. 13
108	108	SEC. 3. TACKING HOLDING PERIOD OF CONVERTIBLE DEBT 14
109	109	INSTRUMENTS. 15
110	110	(a) I
111	111	NGENERAL.—Section 1202(f) of the Internal 16
112	112	Revenue Code of 1986 is amended— 17
113	113	(1) by redesignating paragraphs (1) and (2) as 18
114	114	subparagraphs (A) and (B) and moving such sub-19
115	115	paragraphs (as so redesignated) 2 ems to the right, 20
116	116	(2) by striking ‘‘C
117	117	ONVERSION OF OTHER 21
118	118	S
119	119	TOCK.—If any stock’’ and inserting the following: 22
120	120	‘‘C
121	121	ONVERSION.— 23
122	122	‘‘(1) O
123	123	THER STOCK.—If any stock’’, and 24
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126	126	•S 695 IS
127	127	(3) by adding at the end the following new 1
128	128	paragraph: 2
129	129	‘‘(2) C
130	130	ONVERTIBLE DEBT INSTRUMENTS .— 3
131	131	‘‘(A) I
132	132	N GENERAL.—If any stock in a cor-4
133	133	poration is acquired by the taxpayer, without 5
134	134	recognition of gain, solely through the conver-6
135	135	sion of a qualified convertible debt instru-7
136	136	ment— 8
137	137	‘‘(i) the stock so acquired shall be 9
138	138	treated as qualified small business stock in 10
139	139	the hands of the taxpayer, and 11
140	140	‘‘(ii) the stock so acquired shall be 12
141	141	treated as having been held during the pe-13
142	142	riod during which the qualified convertible 14
143	143	debt instrument was held. 15
144	144	‘‘(B) Q
145	145	UALIFIED CONVERTIBLE DEBT IN -16
146	146	STRUMENT.—For purposes of this paragraph, 17
147	147	the term ‘qualified convertible debt instrument’ 18
148	148	means any bond or other evidence of indebted-19
149	149	ness— 20
150	150	‘‘(i) which is originally issued by the 21
151	151	corporation to the taxpayer, 22
152	152	‘‘(ii) the issuer of which— 23
153	153	‘‘(I) from issuance until conver-24
154	154	sion, is a qualified small business, and 25
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157	157	•S 695 IS
158	158	‘‘(II) during substantially all of 1
159	159	the taxpayer’s holding period of such 2
160	160	bond or evidence of indebtedness, the 3
161	161	corporation meets the active business 4
162	162	requirements of subsection (e), and 5
163	163	‘‘(iii) which is convertible into stock in 6
164	164	the corporation.’’. 7
165	165	(b) E
166	166	FFECTIVEDATE.—The amendments made by 8
167	167	this section shall apply to debt instruments originally 9
168	168	issued after the date of the enactment of this Act. 10
169	169	SEC. 4. GAIN EXCLUSION ALLOWED WITH RESPECT TO 11
170	170	QUALIFIED SMALL BUSINESS STOCK IN COR-12
171	171	PORATION. 13
172	172	(a) I
173	173	NGENERAL.—Section 1202(c) of the Internal 14
174	174	Revenue Code of 1986 is amended— 15
175	175	(1) by striking ‘‘C corporation’’ in paragraphs 16
176	176	(1) and inserting ‘‘corporation’’, and 17
177	177	(2) by striking ‘‘and such corporation is a C 18
178	178	corporation’’ in paragraph (2)(A). 19
179	179	(b) Q
180	180	UALIFIEDSMALLBUSINESSDEFINITION.—Sec-20
181	181	tion 1202(d)(1) of such Code is amended by striking 21
182	182	‘‘which is a C corporation’’. 22
183	183	(c) C
184	184	LARIFICATION OFAGGREGATIONRULESAPPLI-23
185	185	CABLE TOS CORPORATIONS.—Section 1202(d)(3) of such 24
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188	188	•S 695 IS
189	189	Code is amended by adding at the end the following new 1
190	190	subparagraph: 2
191	191	‘‘(C) C
192	192	LARIFICATION WITH RESPECT TO S 3
193	193	CORPORATIONS.—Any determination of the 4
194	194	members of a controlled group of corporations 5
195	195	under this paragraph shall include taking into 6
196	196	account any stock ownership in an S corpora-7
197	197	tion.’’. 8
198	198	(d) T
199	199	REATMENT OF PASSIVELOSSES.—Section 9
200	200	469(g)(1) of such Code is amended by adding at the end 10
201	201	the following new subparagraph: 11
202	202	‘‘(D) C
203	203	ERTAIN DISPOSITIONS OF SMALL 12
204	204	BUSINESS STOCK.—In the case of a disposition 13
205	205	any gain from which is excluded from gross in-14
206	206	come under section 1202, subparagraph (A) 15
207	207	shall not apply.’’. 16
208	208	(e) S
209	209	PECIALRULESRELATING TO S CORPORA-17
210	210	TIONS.—Section 1202(e) of such Code is amended by add-18
211	211	ing at the end the following new paragraph: 19
212	212	‘‘(9) A
213	213	PPLIED AT S CORPORATION LEVEL .—In 20
214	214	the case of an S corporation, the requirements of 21
215	215	this subsection shall be applied at the corporate 22
216	216	level.’’. 23
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219	219	•S 695 IS
220	220	(f) EFFECTIVEDATE.—The amendments made by 1
221	221	this section shall apply to stock acquired after the date 2
222	222	of the enactment of this Act. 3
223	223	Æ
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