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Tax Flash: IRS issues proposed regulations for new limit on interest deduction

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Successful business deal In this Grant Thornton Tax Flash, we provide an in-depth review of the IRS's highly anticipated proposed regulations for the new Section 163(j) limitation to the business interest expense deduction and related issues, expanding on guidance provided last April.

Section 163(j) was created by Tax Cuts and Jobs Act and limits the deduction of business interest for tax years beginning after Dec. 31, 2017, to the sum of a taxpayer’s business interest income, floor plan financing interest, and 30% of its adjusted taxable income for a given taxable year. The proposed regulations provide significant guidance regarding the scope, key definitions, and operating rules for Section 163(j). They also provide special rules for C corporations, consolidated groups, partnerships, S corporations, REITs, RICs, tax-exempt corporations, CFCs, and foreign persons with effectively connected income.

IRS is expecting extensive public comment and a hearing is scheduled on Feb. 25, 2019, but there is no guarantee significant changes will be adopted. Taxpayers should thus carefully assess how the proposed regulations impact their specific tax circumstances. Download our complete Tax Flash to learn more about this important regulation guidance.

Contacts Grace Kim
Principal
Washington National Tax Office
+1 202 521 1590

Joshua Brady
Principal
Washington National Tax Office
+1 202 521 1563

Jeff Borghino
Partner
Washington National Tax Office
+1 202 521 1532

Greg Fairbanks
Managing Director
Washington National Tax Office
+1 202 521 1503

Cory Perry
Senior Manager
Washington National Tax Office
+1 202 521 1509

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