Proposed and Final Regulations were issued addressing Section 163(j) interest.
Links are attached for reference
Final Section 163(j) business interest deduction limitation regulations will be released with newly proposed regulations that will address issues not covered by the coming final regulations.
The proposed regulations under Section 163(j) have not been sent to the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) for review, which may delay the release of the final interest limitation regulations, already at OIRA.
Pending developments this year are focused on the Tax Cuts and Jobs Act (TCJA).
This week expectations – Final FTC Regs, final and proposed BEAT Regs
This year (maybe) – Final and proposed Sec. 163(j) Regs (currently at 550 pages)
This year/January 2020 – Sec 267A final and proposed Regs, Sec 863(b) sourcing proposed Regs
by June 30, 2020 – Final FDII regulations, GILTI high-tax exclusion, Sec 250 participation exemption
EY’s Global Tax Alert provides further details, including OECD developments reported on previously
The IRS recently released Proposed Regulations on Section 163(j): an interest limitation that is applicable for the calculation of Global Intangible Low-Taxed Income (“GILTI”) under the US Tax Act (“TCJA”). A copy of the Proposed Regulations are provided for reference, highlighting some areas of clarity/surprise. Comments are due within 60 days of publication in the Federal Register, with a public hearing set for Feb. 25, 2019.
The most contentious items, as noted in recent days, are the adjustment of Sec. 263A depreciation (thus a factory does not add back depreciation in EBITDA), add back of Sec. 78, Sec. 951(a), Sec. 951A as reduced by the relevant Sec. 250 amount, complexity including excess ATI adjustments, and the new definition of interest, which includes interest equivalent instruments/transactions that will be included as a potential limitation.
The 439 pages require several readings for a general comprehension, aided by webinars and summaries from various advisory firms.