AICPA makes recommendations on proposed regulations to implement TCJA limitations on deduction of business interest expense

The AICPA wrote to the U.S. Department of the Treasury and the IRS making recommendations about the proposed regulations (REG-106089-18) to implement changes made by the Tax Cuts and Jobs Act (TCJA) to Internal Revenue Code section 163(j), the limitation on the deduction for business interest expense.

The AICPA’s recommendations covered a range of topics including the definition of interest, the application of section 163(j) to consolidated groups, to partnership-related items and to international tax items. Also addressed are allocation rules, ordering and operating rules and the interaction of section 163(j) and section 108, which pertains to income from discharge of indebtedness.

The AICPA noted in its comments that “the TCJA substantially amended section 163(j) by placing additional limitations on the deduction of business interest expense for taxpayers and expanding the group of taxpayers to which it applies.”

The AICPA commented on July 9, 2018, on Notice 2018-28, Initial Guidance Under Section 163(j) as applicable to taxable years beginning after Dec. 31, 2017.