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Treasury and IRS release final Section 163(j) regulations

January 2021

Overview

Today, Treasury and the IRS released Final Regulations under Section 163(j).  Treasury previously released proposed regulations under Section 163(j) on July 28, 2020 (published on September 14, 2020 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 provide additional guidance addressing the limitation’s application in contexts involving passthrough entities, regulated investment companies (RICs), and controlled foreign corporations.  The regulations also provide guidance regarding the definitions of real property development, real property redevelopment, and syndicate. 

The final regulations contain 104 pages of preamble language and 74 pages of regulatory text, including 17 examples.  The final regulations apply to tax years beginning on or after 60 days after publication in the Federal Register.

PwC will publish a detailed analysis of the final regulations within the coming days. 

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Doug McHoney

International Tax Services Co-Leader, PwC US

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