Final regulations released to Federal Register: Limiting business interest expense deductions under section 163(j)

Limiting business interest expense deductions

The U.S. Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9943) as additional guidance regarding the limitation on the deduction for business interest expense under section 163(j).

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Read the final regulations [PDF 452 KB] (46 pages) as published in the Federal Register on January 19, 2021.

The IRS on January 5, 2021, posted a version of these final regulations on its website. That version includes the following statement:

This document has been submitted to the Office of the Federal Register (OFR) for publication and will be pending placement on public display at the OFR and publication in the Federal Register. The version of the final rule released today may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register will be the official document.

Read a computer-generated document [PDF 1.7 MB] that provides a comparison of the version of the final regulations submitted today for publication in the Federal Register against the version posted by the IRS on January 5, 2021. This unofficial document was produced by KPMG for the purpose of showing what changes, if any, were made to the regulations prior to being released to the Federal Register for publication. It has not been reviewed for accuracy.

Background

The 2017 tax law (Pub. L. No. 115-97)—the law that is also referred to as the “Tax Cuts and Jobs Act” (TCJA)—added new section 163(j) to the Code, that generally limits the amount of a taxpayer’s business interest deduction. Subsequently, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) (Pub. L. No. 116-136) made changes to the section 163(j) rules by temporarily loosening the interest deduction limitation.

Proposed regulations under section 163(j) were released by the IRS in July 2020 and then ultimately published in the Federal Register in early September 2020. Read KPMG’s initial analysis and guidance about the section 163(j) regulations: TaxNewsFlash

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