Small Business Investment Act of 2025

This bill modifies tax rules for investors in qualified small business stock. It reduces the required holding period from 5 years to 3 years and creates a phased exclusion scale: 50% of gains excluded after 3 years, 75% after 4 years, and 100% after 5+ years. The changes directly affect investors who buy stock in qualifying small businesses, making capital gains tax exclusion more accessible. Key mechanisms include updating Internal Revenue Code Section 1202 to reflect the shorter holding period and revised exclusion percentages, while also clarifying rules for S corporations and convertible debt instruments. These adjustments aim to incentivize investment in small businesses by lowering the tax barrier for holding qualifying stock.