Coordination of Business Interest Limitation with Interest Capitalization Provisions
Section 70341 · Sec. 70341 ·
What this chapter is about
This part makes the business interest cap bite on more interest. It reaches interest a firm adds to the cost of an asset. What the cap lets through goes first to that kind. The changes start with tax years after December 31, 2025.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70341 in the PDF
What the document says
“the limitation under paragraph (1) shall apply to business interest without regard to whether the taxpayer would otherwise deduct such business interest or capitalize such business interest under an interest capitalization provision, and”
The section inserts a new paragraph (10) into section 163(j) of the Internal Revenue Code of 1986, renumbering the paragraphs that follow. The limitation applies to business interest whether the taxpayer would deduct it or add it to the cost of an asset under an interest capitalization provision, and any reference in the subsection to a deduction for business interest includes the capitalization of business interest.
What the document actually says
“the limitation under paragraph (1) shall apply to business interest without regard to whether the taxpayer would otherwise deduct such business interest or capitalize such business interest under an interest capitalization provision, and”
That sentence, in plain words
The cap applies to business interest either way. It does not matter whether the firm would deduct it or add it to an asset's cost.
What this is about
Capitalizing interest means adding it to what an asset cost. That used to sit outside the cap. Now both routes are treated the same.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70341 in the PDF
What the document says
“shall be applied first to the aggregate amount of business interest which would otherwise be capitalized, and”
The section provides that the amount allowed after the limitation goes first to the total business interest that would otherwise be capitalized, with any remainder going to the total business interest that would be deducted.
What the document actually says
“shall be applied first to the aggregate amount of business interest which would otherwise be capitalized, and”
That sentence, in plain words
What the cap lets through goes first to one kind of interest. That is interest the firm would add to an asset's cost.
What this is about
Only what is left over goes to deducted interest. So the order is fixed. It is not for the firm to pick.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70341 in the PDF
What the document says
“Such term shall not include any interest which is capitalized under section 263(g) or 263A(f).”
The section provides that no part of business interest carried forward under paragraph (2) to a later year is treated for any purpose of the title, including any interest capitalization provision that applied to it before, as interest to which such a provision applies. It defines an interest capitalization provision as any provision of the subtitle under which interest must be charged to capital account or may be deducted or charged to capital account. It also adds a sentence to section 163(j)(5) taking interest capitalized under section 263(g) or 263A(f) out of business interest.
What the document actually says
“Such term shall not include any interest which is capitalized under section 263(g) or 263A(f).”
That sentence, in plain words
The term leaves out some interest. That is interest added to what an asset cost. Two rules in the tax code name it.
What this is about
Interest carried into a later year also changes. It stops counting as added to cost. That holds for the whole tax code.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70341 in the PDF
What the document says
“The Secretary shall issue such regulations or guidance as may be necessary or appropriate to carry out the purposes of this subsection”
The section inserts a new paragraph (11) into section 163(j) of the Internal Revenue Code of 1986 requiring the Secretary to issue regulations or guidance to carry out the subsection, including on which business interest is taken into account under it and under section 59A(c)(3), and applies the amendments to taxable years beginning after December 31, 2025.
What the document actually says
“The Secretary shall issue such regulations or guidance as may be necessary or appropriate to carry out the purposes of this subsection”
That sentence, in plain words
The Secretary must write rules for this part. They must cover what the part needs to work.
What this is about
The rules must say which interest counts. The changes start with tax years after December 31, 2025. That date is fixed in the law.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the section does: apply the limitation whether interest is deducted or capitalized, apply the allowed amount first to capitalized interest, deny carried forward interest its capitalized character and define an interest capitalization provision, take certain capitalized interest out of business interest, give the Secretary rulemaking power, and fix the effective date.
The two rounds of paragraph redesignation that make room for the new paragraphs.
The section works by amending section 163(j) of the Internal Revenue Code of 1986 and points to sections 59A, 263(g) and 263A(f), none of which is indexed here.
