On July 25, 2020, the Department of the Treasury (the “Treasury Department”) and the Internal Revenue Service (the “IRS”) issued final regulations (the “Final Regulations”) and proposed regulations (the “New Proposed Regulations” and, together with the Final Regulations, the “New Regulations”) with respect to the limitation on deductions for business interest expense under Section 163(j) of the Internal Revenue Code (the “Section 163(j) Limitation”). The Final Regulations adopt the general framework of proposed regulations that were published on December 28, 2018 in the Federal Register (the “2018 Proposed Regulations”), subject to significant modifications that are discussed below.
As discussed in more detail below, the New Regulations address, among other topics, the definition of “interest” for purposes of Section 163(j) and the application of Section 163(j) to partnerships, controlled foreign corporations, and corporate members of a tax consolidated group. This memorandum provides an overview of some of the most important provisions in the New Regulations, but does not address all of the provisions in the more than 900 pages that are included in the New Regulations and accompanying preambles.