Startup Act 2.0 – Making The 100% QSB Stock Exemption Permanent



Good news for startups. A bill has been introduced in the Senate (S.3217) and an identical bill has already been introduced in the House, titled Startup Act 2.0 which, among other things, would make the 100% exclusion from capital gains tax for qualified small business stock held for 5 years or more (subject to a general $10M cap), permanent. The bill would also make the AMT exclusion permanent as well.

If you recall the history, President Obama has been a supporter of this tax break for startups from early on in his Presidency, and he first succeeded in making this 100% tax break a part of the tax law in September of 2010. Unfortunately, that law expired at the end of 2010, a few months after enactment. The tax break was extended for 1 more year after that, but it expired at the end of 2011. Various groups, including the Angel Capital Association, have been working to have the 100% exclusion re-enacted and made permanent.

Startup Act 2.0 would do the following:

  • Make the 100% exclusion permanent
  • Leave the $10M cap in place
  • Make the AMT exclusion permanent
  • It would only apply to stock acquired after December 31, 2012

See senate bill here:  S3217. You can also find a variety of blog posts that I have written about Section 1202 at the following links:  

  1. Startup America Suggestion of the Day: Make Permanent the 100% Tax Exclusion Under Section 1202 (Installment 7)
  2. President Obama Proposes to Expand and Make Permanent Zero Capital Gains on Small Business Investments
  3. Senate To Consider Temporary Repeal of Capital Gains Taxes On QSB Stock
  4. House Passes 100% Exclusion On Sales of Certain Qualified Small Business Stock
  5. 100% Exclusion From Tax on QSB Stock Bought Before End of Year


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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