House Bill Would Level Playing Field for BDC Investors
SBIA expresses support for BDC tax parity legislation (H.R. 652)
January 24, 2025 (Washington, D.C.) – The Small Business Investor Alliance (SBIA), the leading association representing Business Development Companies (BDC) and lower middle market private equity and its investors, applauded legislation introduced in the House of Representatives that would level the playing field for BDC investors. H.R. 652, introduced by U.S. Rep. Jodey Arrington (R-TX), addresses a notable discrepancy in the tax treatment of BDCs compared to other investment vehicles like Real Estate Investment Trusts (REITs) and S-Corporation banks. Specifically, the bill proposes amending the tax code to allow BDCs to qualify for the 20% deduction on Qualified Business Income (QBI), a benefit that REITs and S-Corp banks already enjoy under Section 199A of the Internal Revenue Code.
“Fixing this part of our tax code will encourage investment in America’s growing businesses, increasing capital flow to the small businesses that drive job creation, innovation, and overall economic growth,” said SBIA President Brett Palmer.
BDCs are critical to providing capital to small and growing businesses, especially in underserved markets. However, they currently do not receive the same tax benefits as other pass-through entities, potentially limiting the flow of private capital into small businesses that need it most. By allowing BDCs to take the 20% QBI deduction, the legislation seeks to incentivize more investments in BDCs, ultimately channeling additional funding to lower middle market companies.
SBIA looks forward to working with Congress on this opportunity to strengthen the investment ecosystem for small businesses and foster economic growth.
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About the Small Business Investor Alliance
The Small Business Investor Alliance (SBIA) is the premier organization of lower middle market private equity funds and investors. SBIA works on behalf of its members as a tireless advocate for policies that promote competitive markets and robust domestic investment for growing small businesses. SBIA has been playing a pivotal role in promoting the growth and vitality of the private equity industry for over 60 years. For more information, visit www.SBIA.org or call (202) 628-5055.
