OBBBA Creates QSBS Rollover Opportunity at Every Stage

On July 4th, President Trump signed the One Big Beautiful Bill Act into law, ushering in the most significant enhancements to Qualified Small Business Stock since Section 1202 was first introduced in 1993. These changes apply to QSBS issued on or after July 5, 2025, and introduce a tiered gain exclusion schedule that fundamentally alters how founders, employees, and early investors should think about early exits, and why QSBS rollovers are now more important than ever.

What Changed?

Previously, investors needed to hold QSBS for five years to qualify for the full 100% capital gains exclusion. The new law introduces a tiered benefit structure:

• 50% exclusion of gain at 3 years

• 75% exclusion of gain at 4 years

• 100% exclusion of gain at 5 years

In addition, the per-issuer cap on eligible gain has increased from $10M to $15M, and the company qualification threshold was raised from $50M to $75M in aggregate gross assets. These changes make it easier for more companies to qualify, and for investors to benefit even after shorter holding periods.

The $50M-$75M cap move is significant especially as we often times think about capital-raised as a proxy for the gross asset eligibility test, for tech companies at least. Now, an easy way to think about the change is, “Has this company raised more than $75M?” If not, dig deeper to see if your shares meet the other criteria. Many more shareholders, even Series B investors and hires (in a lot of cases), may hold QSBS.

Why This Supercharges QSBS Rollovers

For investors who must sell before hitting the five-year mark, due to a liquidity event, tender offer, or acquisition, secondary sale, etc, Section 1045 has long provided a rollover option: reinvest the gain into new QSBS within 60 days, and continue the QSBS holding period to get to future tax exclusion.

Under the old rules, rollovers mainly served to preserve the shot at a future 100% exclusion. But under the new tiered structure, rollovers now unlock real, substantial incremental tax savings at years 3 and 4:

• Example: An investor exits in Year 2 and rolls into new QSBS. Under Section 1045, they retain their original holding period. By Year 3, they can claim a 50% gain exclusion if a liquidity even happens. By Year 4, 75%. They no longer need to wait the full five years to start realizing tax-free gains.

• Practical impact: Early exits no longer mean forfeiting QSBS benefits. Even partial gain exclusions can now be earned post-rollover, making the strategy attractive for high-velocity venture portfolios or serial entrepreneurs who can’t always dictate timing (looking at you, AI unicorns).

This new structure makes rollovers not just a defensive move—but an offensive tax strategy for maximizing returns and liquidity planning.

Planning Implications

• Increased flexibility: Investors who exit before five years (even at year 1 or 2) now have a clear glide path to partial or full tax savings.

• More eligible issuers: The increased $75M gross asset test means many Series B and C companies will now qualify, broadening the QSBS base.

• Founders & employees benefit: These changes are not just for VCs. Early employees and founders with post-July 5 equity awards can now use rollovers to capture gains that would otherwise be fully taxable in early exits.

QSBS rollovers can now be a direct bridge to some sort of tax exclusion at virtually every stage of exit. Our team works exclusively on these rollovers with founders, and our pipeline is flooded with founders early in their journey but with massive traction who are hoping to take advantage of some of these benefits.

The new math is simple: exit early, rollover smart, and watch your tax bill shrink.