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S. 2962Senate119th Congress (2025-2027)In Committee

Small Business Investor Tax Parity Act of 2025

A bill to amend the Internal Revenue Code of 1986 to allow the deduction under section 199A to apply to qualified BDC interest dividends in the same manner as qualified REIT dividends.

Sponsored by Jim BanksSen. Jim Banks (R-IN)
Introduced October 1, 2025

AI-Generated Summary

Updated November 23, 2025 at 8:14 PM UTC

The Small Business Investor Tax Parity Act of 2025 expands the Section 199A deduction, which currently applies to qualified REIT dividends, to also include dividends from certain business development companies (BDCs). By defining a qualified BDC interest dividend and extending the deduction to it, the bill aims to give investors in these BDCs the same tax benefit as those investing in REITs. The changes will apply to tax years starting after 2026 and affect individual and corporate taxpayers who receive such BDC dividends.

Key Provisions

  • Amends the qualified‑business‑income deduction (Section 199A) to treat qualified BDC interest dividends the same way it treats qualified REIT dividends, allowing the same tax deduction.
  • Creates a definition of “qualified BDC interest dividend” as any dividend from an electing business development company that comes from the company’s net interest income tied to a qualified trade or business.
  • Specifies that an “electing business development company” is a BDC that has made the election under Section 851 to be treated as a regulated investment company.
  • Sets the changes to take effect for taxable years beginning after December 31, 2026.

Legislative Activity

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1 earlier action
SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance.

Finance Committee

October 1, 2025

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SenateIntro Referral

Introduced in Senate

October 1, 2025

SenateIntro Referral

Read twice and referred to the Committee on Finance.

Finance Committee

October 1, 2025

Bill Text

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Introduced in SenateIssued October 1, 2025

II

119th CONGRESS

1st Session

S. 2962

IN THE SENATE OF THE UNITED STATES

October 1, 2025

Mr. Banks introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to allow the deduction under section 199A to apply to qualified BDC interest dividends in the same manner as qualified REIT dividends.

1.

Short title

This Act may be cited as the Small Business Investor Tax Parity Act of 2025.

2.

Deduction for qualified business income to apply to certain interest dividends of qualified business development companies

(a)

In general

Subsections (b)(1)(B) and (c)(1) of section 199A of the Internal Revenue Code of 1986 are each amended by inserting , qualified BDC interest dividends, after qualified REIT dividends.

(b)

Qualified BDC interest dividend defined

Section 199A(e) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(5)

Qualified BDC interest dividend

(A)

In general

The term qualified BDC interest dividend means any dividend from an electing business development company received during the taxable year which is attributable to net interest income of such company which is properly allocable to a qualified trade or business of such company.

(B)

Electing business development company

For purposes of this paragraph, the term electing business development company means a business development company (as defined in section 2(a) of the Investment Company Act of 1940) which has an election in effect under section 851 to be treated as a regulated investment company.

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2026.