Thursday July 3, 2025, the House passed HR 1, which includes several provisions of significant interest to the angel investing community. Among them is a reform to the Qualified Small Business Stock (QSBS) Gain Exclusion—also known as Section 1202—one of ACA’s top public policy priorities.

Section 1202 allows capital gains from qualified small business stock to be excluded from federal tax. The newly passed reform modifies the required holding period for eligibility, phasing in the tax incentive beginning at three years instead of five. This change has the potential to improve access to capital for early-stage companies by further incentivizing long-term investment in startups.

ACA’s advocacy also helped secure two additional policy wins:

• A provision making the Research and Development tax credit under Section 174 permanent.
• The successful defense of current carried interest provisions, with no changes included in the legislation.

While the bill does not address all of ACA’s legislative priorities—such as the inclusion of convertible notes in the QSBS holding period—it marks meaningful progress. ACA is especially grateful for the leadership of Rep. David Kustoff and Sen. John Cornyn, who championed these measures in support of small business growth and innovation.

ACA’s Public Policy team remains committed to working with lawmakers across the aisle to advance the remaining goals of our policy platform and ensure angel investors can continue playing a vital role in fueling entrepreneurship across the country.