The One Big Beautiful Bill Act (OBBBA) delivers long-term clarity on two powerful tax planning tools: Qualified Small Business Stock (QSBS) and Opportunity Zones (OZs). For investors, entrepreneurs, and advisors, these changes offer more than just tax benefits—they provide flexibility, predictability, and renewed incentives to build and invest in small businesses and distressed communities.
Qualified Small Business Stock: A Tiered Path to Tax-Free Gains
The new rules for QSBS apply to stock issued after July 4, 2025, and establish a tiered system of capital gain exclusions based on the length of time the stock is held. The 100% exclusion is still available, but only if stock is held for at least five years. A 75% exclusion applies to a four-year holding period, and a 50% exclusion applies to a three-year holding period.
In addition to these new timelines, OBBBA increases the gain exclusion cap. The limit now rises from $10 million to $15 million (or 10 times the taxpayer’s basis in the stock, whichever is greater), with both thresholds indexed to inflation going forward. The qualifying corporation’s gross asset test also increases from $50 million to $75 million.
This expanded framework strengthens QSBS as a viable exit-planning strategy for early-stage investors, founders, and executives. It also makes C corporation structuring more attractive for startups seeking scalable growth with tax-smart outcomes.
Opportunity Zones: Permanently Extended
Initially launched under the 2017 Tax Cuts and Jobs Act, the Opportunity Zone program was scheduled to sunset in 2026. OBBBA removes that deadline, granting the program permanent status. Starting in 2027, new zones will be designated on a rolling 10-year basis, offering fresh opportunities to defer capital gains and exclude future gains from OZ investments.
This permanence could reshape how developers, fund managers, and private equity firms approach long-term projects in underserved areas. The flexibility to plan beyond a looming expiration date opens the door to more ambitious investment strategies and more meaningful impact in qualifying communities.
Layering the Benefits
In some instances, it may be possible to combine QSBS and OZ strategies, particularly when a qualifying business operates within an Opportunity Zone. While the rules are complex and careful planning is essential, this pairing could allow an investor to benefit from deferred taxes on prior gains while potentially excluding gains on a future stock sale as well.
Such an approach is most relevant for high-growth ventures headquartered in OZs, as well as for founders or early investors planning sequential investments over time.
Final Thoughts
The updates to QSBS and OZs are more than technical tweaks—they’re clear invitations to take a longer view of growth, reinvestment, and impact. Whether you’re preparing for a business exit or launching your next venture, these tools may offer more flexibility than ever before.
At Carlile Patchen & Murphy, our tax and business attorneys can help you navigate these strategies with precision, making sure the right structures are in place now to support tax-advantaged outcomes later.
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