Biden Build Back Better Act

The President’s proposed “Build Back Better Act” is currently being hotly debated by the House of Representatives and a proposal is likely to go to the Senate this week. One element of the tax legislation being proposed is of grave concern to small businesses because it wouls severly curtail the capital gains tax exemption for Qualified Small Business Stock(“QSBS”) that currently exists in Section 1202 of the tax code.

For a qualified business, investment in their stock currently benefits from 100% exclusion of capital gains tax on gains of up to the greater of 10M or 10X your cost if the stock is held for at least 5 years. This incentive is extremely valuable to entrepreneurs, key employees, and investors, and serves to stimulate support of early-statge ventuers and small businesses that by many measures generate all new net jobs in this country.

The new legislation would reduce the exemption to 50% from 100% and apply the alternative minimum tax that also is currently excluded for tax filers with average gross income over $400,000.
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