First guidance under amended interest expense limitation clarifies high-profile issues

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April 2018


Treasury and the IRS released Notice 2018-28 (the Notice) on April 2, 2018. The Notice provides interim guidance and describes proposed regulations that they intend to issue on the limitation on business interest expense deduction under amended Section 163(j) for tax years beginning after December 31, 2017.  

The Notice identifies issues that the proposed regulations will cover, but specifically addresses several of the uncertainties with which taxpayers have been grappling since Section 163(j) was amended. These issues include:

  • applying the Section 163(j) limitation at the consolidated tax return filing level
  • allowing the carryforward of a taxpayer’s disallowed disqualified interest that arose under Section 163(j), prior to its amendment
  • treating a C corporation’s interest income and expense as business interest income or expense unless specifically carved out from Section 163(j)
  • allowing a partner to take into account its share of the partnership’s net business interest income.

The Notice also provides that until proposed regulations are issued, taxpayers may rely on the rules set forth in the Notice.


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Doug McHoney

Doug McHoney

International Tax Services Leader, PwC US

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