Many Dem bombthrowers and haters tear their hair out and beat their breasts — whilst wailing and gnashing their teeth — accusing the OBBB of being Trump 2.0’s paen to “Trump’s buddies.” In this instance, it may be true. I will let you drawn the final conclusion.
President Trump 2.0 executed the One Big Beautiful Bill Act of 2025 on 4 July 2025 in a legislative triumph of monumental proportions.
The Qualified Small Business Stock Tax Exemption (IRS Section 1202) is a program that conveys a capital gains tax exemption for profits derived from certain investments that mirror and favor founders, directors, VCs, and angel investors. It is slightly complicated and not really well known.
1. The QSBS came to life in the Revenue Reconciliation Act of 1993 and was intended to spur investment in small businesses. While startups and venture capital were a thing, it was early in their life. It is highly debatable whether it has any real impact on small business other than making founders and financiers wealthy.
I will not bore you with the details of the original program other than to say that once initiated, it was modified substantially.
2. The QSBS was modified in 1997, 2009, 2010, 2017, and most recently on 4 July when Trump 2.0 signed the One Big Beautiful Bill Act 2025. In every instance, the changes made the deal sweeter and sweeter for the investor.
Fine, dear reader. Here are the substantial changes.
1. Prior to the OBBB, the maximum amount of an investor’s profit that could be exempt from capital gains taxes was $10MM. Under the OBBB, that number is now $15MM.
[There is an important side note here — it is actually the greater of $15MM or 10X the originally invested amount. So, it could be substantial. Like SUBSTANTIAL. This is not small potatoes.]
2. Along the same line, eligible companies used to be limited to C corporations with gross assets — market value of property and cash on hand — not more than $50MM. Under the OBBB, that number is now $75MM.
3. Prior to the OBBB, there was a 5-year holding period for all QSBS eligible investment. Under the OBBB, that has changed:
Investments held for 3 years receive 50% of the exemption.
Investments held for 4 years receive 75% of the exemption.
Investments held for 5 years receive the full exemption — not a change.
4. The qualified stock must be acquired directly from the company for cash, property, or services. Shareholders can be founders, directors, other individuals, trusts, estates, and partnerships.
A current bone of contention is the use of “stacked” entities by investors to avail themselves of more than one qualified investment sin a single company. The OBBB was silent on this matter.
5. The OBBB clarified the use of “exchanges” wherein an investor may take the proceeds of an original investment and “re-invest” it into another QSBS qualified company as long as it is done within 60 days.
For big VC firms, this can be used to create a massive portfolio of QSBS qualified investments. OTOH, non-taxable venture LPs like pension funds are not sensitive to tax considerations.
An investor can also “gift” QSBS eligible shares to other entities — think family trusts, kids’ trusts, and other investment vehicles. In this manner, an investor may have a great number of bobbers in the water at the same time. It is this kind of thing that pushes the envelope.
OK, dear reader, I hope nothing is seriously wrong with you.
The Trump 2.0 OBBB did a solid for founders, directors, VCs, angel investors, and startups. It substantially sweetened the pot.
The Trump 2.0 OBBB also did a solid for the same folks as it relates to the carried interest, R&D tax credits, bonus depreciation, business interest deductions, and qualified business income. I will touch on these matters in future posts. Bonus depreciation is HUUUUUGE!
The Trump 2.0 OBBB was very good to business. What did you expect?
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car.
