The One Big Beautiful Bill updated Section 1202 (QSBS) in meaningful ways. While much of the attention has focused on the higher exclusion cap ($15M) and the expanded gross-asset threshold ($75M), issuance timing has become just as important.

Grants issued on or after July 5, 2025 now fall under a different QSBS regime than earlier grants—often on the same cap table, within the same company.

For equity that straddles the July 4 cutoff, the tax differences are already showing up in exit modeling.

Holding Period Structure

Prior QSBS required a full five-year hold to qualify for any exclusion. Post-OBBB issuances follow a graduated framework:

🔷 3-year hold → 50% exclusion

🔷 4-year hold → 75% exclusion

🔷 5-year hold → 100% exclusion

An employee with a June 2025 grant and an August 2025 grant can face materially different outcomes in a sub-five-year exit, driven entirely by issuance date.

Gross Asset Threshold: The increase from $50M to $75M reopened QSBS eligibility for some companies. If a company exceeded $50M before July 5, 2025 but remained below $75M, earlier grants may be permanently disqualified while later grants—at the same valuation—may qualify. The business may be unchanged; the tax result is not.

🔸 For employees: Exercise timing now carries more weight, particularly around financing events or balance-sheet inflection points near the $75M threshold. The decision is no longer just about strike price and liquidity.

🔸 For founders: Sequencing matters. Earlier "old QSBS" capacity and post-OBBB issuances may be layered over time, subject to applicable limitations and a facts-and-circumstances analysis.

🔸 For companies: Accurate tracking of gross assets and issuance dates at each grant is critical. A July 3 grant and a July 7 grant can carry meaningfully different downstream tax and reporting implications—and employees will eventually ask why.

Section 1202 (QSBS) analysis is now more grant-timing-sensitive than it has been in years. For anyone holding equity in a growth-stage company, understanding which regime applies to each grant is a necessary starting point.

For educational purposes only. Not tax or legal advice. QSBS eligibility is highly fact-specific.