I.R.C. Section 163(j): Proposed and Final Regulations and CARES Act Modifications Explained

Summary

This practice note discusses the 2018 proposed regulation (issued December 28, 2018), final regulations (effective November 13, 2020), and 2020 proposed regulations (issued September 14, 2020) under I.R.C. Section 163(j). The Tax Cuts and Jobs Act (TCJA ), Pub. L. No. 115-97, had previously modified I.R.C. Section 163(j) in 2017 and Congress again modified this section in 2020 in the CARES Act. Pub. L. No. 116-136. The proposed and final regulations outline general rules, define certain terms, and provide special rules for certain entity types in calculating the limitation on the taxpayer's interest deduction. The CARES Act provides taxpayer relief, in part by changing the 30% limitation in I.R.C. Section 163(j) to 50% for the 2019 and 2020 taxable years. I.R.C. § 163(j)(10). For the most part, the 2020 final regulations primarily reaffirm the 2018 proposed regulations and provide certain needed technical clarifications. See 2018 Proposed Regulation, 83 FR 67490, REG-106089-18; 2020 ...