ACA Webinar: QSBS, R&D, and Updates Post‑H.R. 1
ACA Webinar – QSBS, R&D, and Carried Interest Updates Post–H.R. 1
Why this webinar matters
On July 4, 2025, President Trump signed the “One Big Beautiful Bill” Act (H.R. 1) into law following razor‑thin votes in both chambers of Congress. Although the legislation is sweeping and politically charged, it contains provisions that are especially relevant to early‑stage investors and founders. The Angel Capital Association’s webinar—hosted by Mark Friedman and Joe Wallin— unpacks these changes for the angel investing community.
Key takeaways for investors and entrepreneurs
Qualified Small Business Stock (QSBS). The Act overhauls the QSBS rules in Section 1202. Previously, an investor had to hold QSBS for five years to exclude 100% of the gain. Under H.R. 1, gain exclusion is phased in: 50% of gains may be excluded after three years, 75% after four years, and full exclusion remains available after five years. In addition, the per‑issuer cap on excluded gains rises from $10 million to $15 million and will be indexed for inflation starting in 2027. The gross asset limit for companies whose stock qualifies for QSBS also increases from $50 million to $75 million. These changes apply to stock issued or acquired after the bill’s enactment and should make QSBS even more attractive for both investors and high‑growth startups.
Research & Development (R&D) incentives. Section 174 of the Internal Revenue Code once allowed businesses to fully deduct their R&D expenses in the year those expenses were incurred. The Tax Cuts and Jobs Act of 2017 curtailed that option, forcing companies to amortize R&D over five to fifteen years and raising their tax bills. H.R. 1 reverses this change: it permanently restores first‑year expensing and makes the provision retroactive to 31 December 2021 for small businesses with gross receipts under $31 million. The Angel Capital Association similarly notes that the bill makes the R&D credit under Section 174 permanent.
Carried interest. There was speculation that lawmakers might eliminate the favorable long‑term capital gain treatment of carried interest to offset other tax cuts. In the end, the Act preserves the status quo—carried interest will continue to be taxed as long‑term capital gains. For emerging fund managers, many of whom rely on carried interest to cover overhead and compensate staff, this continuity provides important certainty.
Caveats and next steps
While the bill introduces meaningful reforms, it does not address every priority of the angel investing community. For example, convertible notes are still not counted toward the QSBS holding period. As always, investors and founders should consult with their tax and legal advisors to understand how these changes apply to their specific situations. This webinar provides a great primer, but personalised advice is essential.
Disclaimer: The information above is for general informational purposes only and does not constitute legal or tax advice. For guidance tailored to your particular circumstances, please consult with your professional advisors.
