IRC Section 163(j), enacted by the Tax Cuts and Jobs Act of 2017 (TCJA), generally limits business interest expense deductions to 30% of adjusted taxable income effective for tax years beginning on or after Jan. 1, 2018. Proposed regulations were published on Dec. 28, 2018.
The proposed regulations contain many controversial positions, including the treatment of debt issuance costs as interest expense and the inability to include cost of goods sold depreciation in adjusted taxable income. The proposed regulations do not contain guidance on key issues such as the application of the interest expense limitation to tiered partnerships.
Now, as most taxpayers are getting ready to file their 2019 federal income tax returns, the U.S. Department of the Treasury is finalizing the 2018 proposed regulations. The Office of Management and Budget (OMB) concluded its review of these regulations on Jan. 31, 2020. In addition, on Feb. 7, 2020, Treasury submitted a new package of proposed IRC Section 163(j) regulations to the OMB for review.