Document Type


Journal Title

Tax Notes Federal


November 18, 2019

First Page


Publication Date



New section 163(j) strictly limits business interest expense (BIE) deductions to large (and possibly not-so-large) taxpayers. Generally, BIEs may only be deducted to the extent that they do not exceed 30 percent of adjusted taxable income plus business interest income. Section 163(j)(4) requires partnerships to calculate this limitation at the partnership level. In this report, I focus on how section 163(j) applies to partnerships. Given my focus, I leave to others a more comprehensive review of section 163(j) as a totality,1 as well as the coverage of S corporations. I will tend to give fairly short shrift to the portions of the statute and proposed regulations (REG-106089-18) that do not primarily apply to partnerships. For the most part, I assume the reader is well-versed in subchapter K. I begin by laying out some background to the enactment of section 163(j) and its application to partnerships.

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