Conforming Trust Planning for QSBS in Pennsylvania's Nonconforming Landscape

Private Wealth Services and Tax attorney Brian Balduzzi published an article in The Legal Intelligencer sharing planning considerations for Pennsylvania residents holding qualified small business stock (QSBS) ahead of liquidity events. Brian explains how Pennsylvania's lack of conformity with the federal capital gains exclusion under Internal Revenue Code Section 1202 can create additional state income tax exposure for founders and investors. He outlines estate and tax planning strategies, including the use of irrevocable nongrantor trusts in jurisdictions such as Delaware, South Dakota and Nevada, that may help families reduce state income taxes while supporting long-term wealth transfer goals. Brian also addresses timing considerations and recent IRS and U.S. Department of the Treasury scrutiny of certain QSBS trust planning strategies. The article concludes that taxpayers in states like Pennsylvania that do not conform to federal income tax treatment under Section 1202 will benefit from advanced planning and attention to detail to craft a strategy that maximizes their wealth management goals.

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