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Small businesses are under attack in Congress. Democratic lawmakers have proposed a retroactive tax increase in the $1.75 trillion reconciliation bill that will hurt small business owners, small business employees, and small business investors.
Take action: tell your Senators & Representatives to defend the small business economy by protecting QSBS. Your message can make a difference. Use the form below to send a pre-written email, and tweet your representatives.
Background: Since 2010, Qualified Small Business Stock (QSBS) has received preferential tax treatment compared to stock in big businesses, because lawmakers understood that small businesses were the economic engine of our economy. Presidents Obama and Trump supported QSBS because it encouraged small business formation, investment, and hiring.
What lawmakers want to change: Under current law, people who sell QSBS get a 100% tax exclusion. Democratic lawmakers in Congress have proposed eliminating the 100% benefit, including on stock that was acquired up to 12 years ago.
Example: Someone invested $100,000 into a qualified small business in 2010. When the company is sold later this year, their gain is $500,000. Under the law today, they would pay no Federal tax on that sale. But if lawmakers pass their bill, they would pay an extra $84,400 in Federal taxes.
Look back: If people had known the rules would change, they would have made different decisions about how to structure their companies, compensate their employees, where to invest, and when to sell.
Look forward: if passed, holders of QSBS will pay billions in added taxes instead of getting the tax break they were promised.
Spot the trend: Small businesses are under-represented in Washington. Congress ignores them because they are fragmented and don’t have lobbyists.
If you care about small businesses, tell your lawmakers to defend QSBS.
“Now that the House has passed the Build Back Better Act (H.R. 5376), the bill makes its way to the Senate for further consideration, possibly to become law. While the Biden administration has trumpeted the legislation as being able to “rebuild the backbone of the country,” it seems that rebuilding the American start-up wasn’t a top priority in this version of the bill.”
29 Nov 2021
“Earlier this year, Silicon Valley breathed a sigh of relief when the Biden administration made clear that despite other tax hikes, the Qualified Small Business Stock (QSBS) exclusion would be retained without change. But now, the Ways & Means Committee has proposed slashing QSBS benefits for high income persons.”
14 Sept 2021
“Buried deep in President Joe Biden’s 2021 tax plan are new amendments to the United States’ Qualified Small Business Stock (QSBS) program, which, if passed, will directly impact early-stage startup employees, founders and investors”
19 Oct 2021
“After more than two months of negotiations in the US Congress, a slimmed-down version of the ‘Build Back Better Act’ narrowly passed the US House of Representatives on November 19, 2021.
The capital gain exclusion rates for qualified small business stock (QSBS) will be limited to a 50% exclusion (down from 75% and 100%)”
National Law Review
22 Nov 2021
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