This bill introduces a tax deduction from New Jersey gross income for individuals who sell or exchange qualified small business stock (QSBS) that has been held for more than five years. The deduction allows taxpayers to exclude eligible gains from such transactions, with a maximum limit of $10 million for individual taxpayers and $5 million for married individuals filing separately. To qualify as QSBS, the stock must be from a domestic C corporation with no more than $50 million in assets at the time of issuance, and at least 80% of the corporation's assets must be actively used in qualified business activities. The bill also aligns with the federal Internal Revenue Code's capital gains exclusion under section 1202, aiming to stimulate investment in small and medium-sized businesses in New Jersey.

Furthermore, the bill includes provisions for the treatment of gains from pass-through entities and sets conditions for stock to be considered qualified, such as restrictions on stock purchases by the issuing corporation during certain periods. Corporations issuing QSBS are required to submit reports to the Director of the Division of Taxation and their shareholders, and the Director is empowered to create regulations to prevent avoidance of the act's purposes. The legislation limits the excludable capital gains to the greater of $10 million or ten times the aggregate adjusted basis of QSBS disposed of during the taxable year, with specific conditions regarding the corporation's payroll and stock acquisition. The act is intended to take effect immediately upon passage.