The bill, titled the Small Business Investment Act of 2025, significantly modifies the exclusion for gain from qualified small business stock (QSBS) under the Internal Revenue Code. It replaces the previous 50% exclusion with a new phased approach, allowing taxpayers to exclude a greater percentage of gain based on the holding period. Specifically, the exclusion is 50% for stock held for 3 years, 75% for 4 years, and a full 100% for stock held for 5 years or more. This also reduces the minimum holding period for any exclusion from five years to three years. A major change is the expansion of QSBS eligibility by removing the requirement that the issuing entity be a C corporation , thereby allowing S corporations to issue QSBS. The bill also introduces a provision to allow the holding period of a qualified convertible debt instrument to be "tacked" onto the holding period of stock acquired through its conversion, provided certain conditions are met. This aims to encourage investment in small businesses through convertible debt instruments. Furthermore, the legislation clarifies that the requirements for QSBS for S corporations will be applied at the corporate level and includes S corporations in controlled group aggregation rules. It also specifies that gain excluded under Section 1202 will not be subject to passive loss limitations, providing additional tax benefits. These amendments generally apply to stock acquired or debt instruments issued after the bill's enactment.