Partial exclusion from gain for interests in socially disadvantaged businesses

(a)

In general

Section 1201 of the Internal Revenue Code of 1986 is amended to read as follows:

1201

Partial exclusion from gain for interests in socially disadvantaged businesses

(a)

Exclusion

Gross income shall not include 50 percent of any gain from the sale or exchange of a certified equity interest held for more than 3 years if the taxpayer affirms that during the term of such investment—(1)in the case of a corporation, not less 331/3 percent of the total combined voting power of all classes of stock or not less than 331/3 percent of the total value of shares of all classes of stock were owned, directly or through the application of section 318, by one or more socially disadvantaged individuals who were citizens of the United States, or(2)in the case of a partnership, at least 331/3 percent of the capital interest or profit interests in such partnership were owned, directly or through the application of section 318, by one or more socially disadvantaged individuals who are citizens of the United States.(b)

Application

(1)

In general

A socially disadvantaged business may submit a joint application with an investor for an equity interest in such business held by such investor to be certified as a certified equity interest in such manner as the Secretary determines appropriate. (2)

Certification

The Secretary shall review applications received under paragraph (1) in the order in which such applications are received and make a determination regarding certification with respect to an application not later than 45 days after the date of receipt of such application.(c)

Notification of issuance of certified equity interest

Not later than 30 days after issuing a certified equity interest, the issuer shall notify the Secretary of such issuance.(d)

Limit on certified equity interests issued

The Secretary may not, in aggregate, certify more than $30,000,000,000 in total equity interests under subsection (b)(2).(e)

Regulations

The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section.(f)

Definitions

(1)

Certified equity interest

The term certified equity interest means an equity interest certified under subsection (b)(2) which is originally issued—(A)after the date of enactment of the Better Opportunity and Outcomes for Socially Disadvantaged Talent Act of 2021,(B)not later than 60 days after the issuance of a certification under subsection (b)(2), except that in no case may any period in which the issuance of such equity interest is reviewed for purposes of regulatory approval be used to calculate such 60-day period, and(C)to the taxpayer—(i)in exchange for money or other property, or(ii)as compensation for services provided to such socially disadvantaged business (other than service performed as an underwriter of such interest).(2)

Socially disadvantaged business

The term socially disadvantaged business means a domestic corporation or partnership that meets the following requirements:(A)In the case of a corporation, not less 331/3 percent of the total combined voting power of all classes of stock or not less than 331/3 percent of the total value of shares of all classes of stock are owned, directly or through the application of section 318, by one or more socially disadvantaged individuals who are citizens of the United States.(B)In the case of a partnership, at least 331/3 percent of the capital interest or profit interests in such partnership are owned, directly or through the application of section 318, by one or more socially disadvantaged individuals who are citizens of the United States.(C)Not less than 80 percent by value of the assets of such business are used by such business to conduct a trade or business.(3)

Socially disadvantaged individual

(A)

In general

The term socially disadvantaged individual has the meaning given such term in section 124.103 of title 13, Code of Federal Regulations, as in effect on the date of the enactment of this section.(B)

Prohibition

The Secretary may not implement a restriction on the personal wealth, income, or total assets of an individual for purposes of determining whether such individual is a socially disadvantaged individual for the purposes of this section.

(b)

Implementing regulations

The Secretary of the Treasury shall, not later than 60 days after the date of the enactment of this section, issue regulations implementing the amendments made by this Act.(c)

Conforming amendment

The item relating to section 1201 in the table of sections for part I of subchapter P of chapter 1 of subtitle A of such Code is amended to read as follows:

1201. Partial exclusion from gain for interests in socially disadvantaged businesses.

(d)

Effective date

The amendments made by this section shall apply to sales on and after the date of the enactment of this section, in taxable years ending on and after such date.