[4] The tax exemption allows for the exclusion from taxable income of capital gains up to the greater of $10 million or 10 times the shareholder's basis in their stock (i.e., initial investment in the company).
[6] Expansion and modification of these original aspects of QSBS legislations have occurred over the years to further motivate taxpayers to invest in, or even create, certain types of small businesses to boost job creation and to prevent economic recession.
[7] Over the decades, several legislative events have contributed to investor interest in the QSBS Section 1202 capital gains tax exclusion: August 10, 1993, the Public Law No.
103-66 Title VIII Part II Subpart B – Capital Gains Provision was passed by the House of Representatives Budget Committee and added to the Internal Revenue Code (IRC) as Section 1202.4.
[14] QSBS eligibility and tax exemption benefits aim to fuel job growth on a national level by incentivizing investments in C-corporations located in the United States.
However, QSBS eligibility excludes companies where individuals or groups of employees are considered the "product," such as healthcare workers, accountants, or lawyers.
Originally, the enactment of the QSBS tax exemption legislation worked to incentivize investments in certain types of small businesses within the United States.