The "Small Business Investment Act of 2025" significantly amends the Internal Revenue Code regarding the exclusion for gain from qualified small business stock (QSBS), aiming to incentivize investment in small businesses. A key provision introduces a phased increase in the exclusion percentage for QSBS gain, starting at 50% for stock held for at least three years, increasing to 75% for four years, and reaching 100% for stock held for five years or more. This change also reduces the minimum holding period required for any exclusion from five years to three years. The bill also addresses the treatment of QSBS gain under the alternative minimum tax (AMT) by clarifying that the 7% AMT preference item will no longer apply to QSBS acquired after the enactment of the Creating Small Business Jobs Act of 2010, effectively removing it for future acquisitions. Furthermore, it expands the types of entities eligible for the QSBS exclusion by removing the requirement that a qualified small business must be a C corporation , thereby extending benefits to S corporations. For S corporations, the bill clarifies that the QSBS requirements are applied at the corporate level and that S corporation stock ownership is included in controlled group aggregation rules. Another important modification allows for the tacking of holding periods for qualified convertible debt instruments. If stock is acquired through the conversion of such an instrument, the holding period of the debt instrument can be included when determining the stock's holding period for QSBS exclusion purposes. Finally, the bill exempts gain from the disposition of QSBS from certain passive loss limitations, further enhancing the attractiveness of these investments. These amendments generally apply to stock acquired or debt instruments issued after the bill's enactment.