New York State currently aligns with federal Qualified Small Business Stock (QSBS) provisions, allowing eligible taxpayers to exclude significant capital gains from the sale of qualifying small business stock. This conformity was recently highlighted after a client nearly relocated from New York based on erroneous advice from AI chatbots, according to a social media post by "wilson d’internet," founder of TaxBench.
"A client was literally pricing moving trucks to leave NY because three chatbots confidently told him NY doesn't conform to federal QSBS. It does. He had screenshots. They were just wrong. This is why we built TaxBench."
The incident underscores the ongoing challenge of relying on artificial intelligence for complex tax advice, despite recent legislative discussions in New York regarding QSBS. In April 2026, New York lawmakers advanced a proposal to decouple from the federal QSBS exclusion, which would have required taxpayers to include federally excluded gains in their New York gross income. However, this proposal was swiftly withdrawn following significant criticism from the technology and venture capital industries.
The federal QSBS exclusion, governed by Section 1202 of the Internal Revenue Code, was substantially expanded in July 2025 with the "One Big Beautiful Bill Act" (OBBBA). This act increased the exclusion cap to $15 million and introduced tiered exclusions for shorter holding periods, aiming to incentivize investment in startups. While New York generally follows these federal guidelines, the withdrawn decoupling proposal signals a potential future re-evaluation by state lawmakers, as other states like Oregon have recently enacted legislation to decouple from the QSBS exclusion.
The experience of the client, who was incorrectly informed by multiple chatbots that New York did not conform to QSBS, emphasizes the critical need for accurate, human-verified tax guidance. TaxBench, founded by wilson d’internet, positions itself as a solution to such inaccuracies, suggesting a growing market for specialized, reliable tax technology. The event serves as a cautionary tale regarding the limitations of current AI models in providing precise, context-dependent financial and legal counsel.
