January 19, 2016
A temporary tax incentive benefitting investors in smaller and entrepreneurial companies, which in recent years had been extended on a recurring basis by Congress, is now a permanent part of the federal tax code thanks to legislation signed into law in December 2015.
A provision of the Protecting Americans from Tax Hikes Act of 2015 enshrines an exclusion from federal income tax applicable to gains from qualified small business (“QSB”) stock acquired after September 2010. This Client Alert (see link above) from the Wyrick Robbins Tax Group provides an overview of the incentive: what type of companies qualify as QSBs; which taxpayers are eligible for the exclusion; what type of shares qualify; the extent to which the date the stock was acquired and length of time it was held are relevant (and how those are determined); how qualifying shares acquired before September 2010 are treated; and the maximum amount that can be excluded. The Client Alert also addresses the alternative minimum tax implications and also briefly considers potential local and state tax consequences.