Today, Treasury and the IRS released Final Regulations, Proposed Regulations, Notice 2020-59, and FAQS regarding the aggregation rules under Section 448(c)(2) that apply to the Section 163(j) small business exemption. Treasury previously released proposed regulations under Section 163(j) on November 26, 2018 (published December 28, 2018 in the Federal Register). Section 163(j), which was modified by the 2017 Tax Reform Act and the CARES Act, limits US business interest expense deductions to the sum of business interest income, 30% (or 50% as applicable) of adjusted taxable income (ATI), and the taxpayer’s floor plan financing interest for the tax year.
The final regulations contain 284 pages of preamble language and 291 pages of regulatory text, including 107 examples. The final regulations are effective 60 days after publishing in the Federal Register. The proposed regulations contain 153 pages of preamble language and 132 pages of regulatory text, including 29 examples. Public comments are due 60 days after publication in the Federal Register.
PwC will publish a detailed analysis of the final and proposed regulations within the coming days. In addition, we will discuss the latest Section 163(j) guidance in a Tax Readiness Series webcast (registration coming soon).
PwC Tax Insight: Treasury issues proposed rules under Section 163(j)