Many of the changes are beneficial and could provide retroactive relief to when the limit first became effective. Replacing the unpopular “roll-up” approach for grouping controlled foreign corporation (CFC) excess taxable income.Retaining the complex 11-step calculation for partnerships allocating items affecting excess income.Expanding an anti-abuse rule for real estate trades or businesses eligible to elect out of the limit.Revising depreciation and amortization recapture rules.Removing an ordering rule for applying the Section 250 deduction to ATI for Section 163(j), and reserving on the issue of ordering for this and other deductions.Removing a rule requiring manufacturers and other taxpayers to add back amounts capitalized to inventory to determine their adjusted taxable income (ATI).Retaining a broad definition of interest, but narrowing it importantly in select areas.Important developments in the new rules include: Section 163(j) was substantially amended by the Tax Cuts and Jobs Act (TCJA) of 2017 to limit the deduction of business interest for tax years beginning after Dec. The final regulations revise and replace proposed regulations that were issued on Nov. The guidance package consists of a robust set of final regulations ( TD 9905), new proposed regulations ( REG 107911-18), frequently asked questions (FAQ), and a proposed revenue procedure ( Notice 2020-59).
The IRS issued substantial guidance on July 28, 2020, under Section 163(j) that will provide many businesses ( e.g., manufacturers and real estate companies) significant relief from the limit on interest deductions.
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