Innovators gain ground in tax policy—QSBS & R&D

Topline

• Senate tax proposal delivers wins for innovation ecosystem

• Landmark stablecoin bill passes Senate with strong vote

• Carta & Mayer Brown: Private credit event recap

• Treasury outlines principles for AML overhaul

• Carta VC Fund Performance Report: Q1 2025

Senate tax proposal bolsters innovation ecosystem…but may need more to pass

The Senate-proposed tax language aligned with the innovation ecosystem, and with Carta’s priorities. Carta and the innovation coalition—the Innovator Alliance— pushed Congress to restore R&D expensing, expand the qualified small business stock (QSBS) exemption, and retain carried interest tax treatment.  The proposal does all three:

• R&D: Permanently restores full and immediate expensing of R&D investments in the year they were incurred, and applies this adjustment retroactively for small businesses. 

• QSBS: Phases in the benefit starting at three years (3-year holding has 50% exclusion; 4-year holding has 75% exclusion; and 5-year holding has 100% exclusion from capital gains). In addition, the proposal would raise the company eligibility cap from $50M in net assets to $75M, and increase the benefit cap from $10M to $15M, while indexing for inflation. 

• Carried interest tax treatment: No change; remains intact at long-term capital gains levels.

This is a resounding win, if we can keep it. And that is our focus now. 

Next steps: The Senate proposal has met criticism from both Senate Republicans (focused on Medicaid, energy tax credits, and spending levels) and House Republicans (focused on SALT). Plan A for supporters of the bill: The Senate amends the text to resolve these concerns and passes the bill late next week; the amended text has enough support in the House for quick House passage; and the president signs the bill on July 4. But best-laid plans…it is possible the text needs to be drastically changed to garner the support and that not only delays the process, but opens negotiations across the board. 

July 4 is the aspirational deadline. It may slip. The only real deadline is x-date in August, at which time the country would breach the debt ceiling.

Engagement: Carta and its coalition partners support the Senate proposal that bolsters R&D, QSBS, and retains carried interest. Those issues have the necessary support on the policy side (due to the hard work of us and our coalition), but could come under pressure if the bill needs to trim costs—R&D could be trimmed on duration; QSBS expansion could come out; and the tax treatment on carried interest could be curbed. We are confident we can hold the line, but we continue to engage with offices to cement this progress.

Stay tuned. And contact us— policy@carta.com—with questions or if you want to get engaged.

Senate passes landmark stablecoin bill with strong bipartisan support

This week, the Senate passed its first crypto-related legislation by a 68-30 vote, marking a big win for the industry. The GENIUS Act would create the first-ever U.S. regulatory framework for payment stablecoins—digital tokens that are pegged to the value of the U.S. dollar.

What’s next: The GENIUS Act now moves to the House, which has its own version of the stablecoin legislation. The question becomes whether the House tries to amend the Senate version, include it as part of a broader crypto package, or rubber stamp the Senate version. There are concerns that passage of the GENIUS Act as a standalone could also take momentum out of broader efforts to enact a market structure framework for digital assets, but any modifications to the stablecoin bill would have to go back to the Senate, which could jeopardize future passage. President Trump is putting pressure on the lower chamber to move the Senate-passed version as-is, which seems like the most likely scenario. 

Carta & Mayer Brown: A Discussion on Private Markets and Private Credit

This week, the Carta Policy team joined Mayer Brown, industry experts, and former SEC officials for an insightful discussion around the latest trends in private credit and BDCs, efforts to democratize access to private markets, and what this means for the regulatory landscape. Some key takeaways:

• The SEC and Congress have and will continue to take steps to enable retail investors to access diversification and growth opportunities in the private markets, primarily through greater exposure to private credit and private equity through registered interval funds.

• The lines between public and private markets will continue to blur. More retail access will necessitate a shift in standards to increase transparency, reporting, and disclosure for illiquid assets.

• As retail gains more exposure to private markets, scrutiny will also increase, particularly around opacity, illiquidity, and potential impacts in an economic downturn.

A big thank you to the Mayer Brown team for their partnership and for hosting a great event!

Treasury outlines principles for AML overhaul

In remarks this week, Deputy Treasury Secretary Michael Faulkender laid out guiding principles for Bank Secrecy Act (BSA) modernization that focuses on a risk-based, proportional, and cost-effective approach to anti-money laundering/countering the financing of terrorism (AML/CFT) supervision. 

Why it matters: As the law currently stands, on Jan. 1, 2026, investment advisers—RIAs and ERAs—will be required to implement risk-based AML programs. This will include developing internal policies and procedures reasonably designed to prevent the fund from being used for money laundering, terrorist financing, or other illicit activities, which includes reporting and information-sharing requirements. It would also require private equity and venture capital fund advisers to designate an AML compliance officer, train staff on AML compliance, undergo independent testing, and conduct ongoing customer due diligence. 

Next steps: Though the requirements are scheduled to take effect in 2026, it is increasingly likely they get delayed. That said, speeches such as Faulkender’s signal that even though the standards may be delayed or changed, building an AML regime is a priority. 

Carta VC Fund Performance: Q1 2025

Check out our latest report providing a snapshot of fund performance based on data from more than 2,500 funds on Carta. Here are a few highlights:

• For recent funds, DPI (distributed paid-in capital) is hard to find: Is this surprising? No. Is it depressing? Maybe a little. Just 37% of funds in the 2019 vintage had generated any amount of distributions for their LPs by the end of Q1 2025.

• Smaller funds have grown more common: Back in the 2020 vintage, 25% of closed venture funds were between $1 million and $10 million in size, and 36% were between $25 million and $100 million. In the 2024 vintage, 42% of funds were between $1 million and $10 million.

• TVPI (total value to paid-in capital) figures show slight positive momentum: The median TVPI increased in Q1 for each of the 2017, 2018, and 2020 vintages. Before this, the TVPIs for these vintages had been steadily trending down. Scrounging for optimism wherever we can.

Download the full report here.

Quick hits

• Coinbase seeking U.S. SEC approval to offer blockchain-based stocks. Coinbase is pursuing SEC approval to offer tokenized equities—digital tokens issued via blockchain that represent traditional stocks. This would effectively enable 24/7 on-chain stock trading, leading to lower fees and faster settlement.

• House to consider capital formation proposals. The House added a number of bipartisan capital formation bills to the suspension calendar, signaling the chamber expects to advance these measures next week. This includes legislation that would codify accredited investor thresholds and expand on-ramps through sophistication and exclude business development companies (BDCs) from the calculation of acquired fund fees and expenses (AFFE), among others.

• Elizabeth Warren sounds alarm on private equity in 401(k) plans. The lead Democrat on Senate Banking sent a letter to Empower questioning its plans to allow private equity and private credit into its retirement plans, raising concerns around high fees, lack of transparency, and performance history of the asset classes. These concerns also highlight potential areas for liability exposure, which has prevented plan administrators from offering access to private capital assets. 

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