The last official guidance we received on the application of the business interest limitation under IRC §163(j) arrived late in 2018 with proposed regulations.  We now have signs that additional guidance is on the way, both in terms of final regulations[1] and additional proposed regulations[2] based on regulatory review information posted on the website of the Office of Information and Regulatory Affairs (OIRA).  However, we are still a bit in the dark on exactly when the guidance will be seen—and, more to the point, whether it will emerge before or after the first 2019 return original due dates arrive.

OIRA first posted notification that it had completed its review of §163(j) final regulations, based on the 2018 proposed regulations.  While the posting indicated the review had been completed on January 31, 2020, [3] the information does not appear to have been posted on OIRA’s website until February 4, 2020.[4]

In a Tax Notes Today Federal article, Emily Foster summarized what information has been released to date on what will likely be in the final regulations:

The final regulations follow up on 2018 proposed rules (REG-106089-18) that drew criticism concerning, among other things, Treasury’s perceived regulatory authority to broadly define interest and entity-specific issues for partnerships, consolidated groups, and controlled foreign corporations.

Treasury and the IRS have said the regs will reflect significant changes to the proposed rules and address myriad issues, including the definition of interest, the computation of adjusted taxable income, and the small business exception.[5]

However, as is also noted in that article, Bryan Rimmke, attorney-adviser, Treasury Office of Tax Legislative Counsel had indicated in January at the District of Columbia Bar conference that the final rules would likely be released along with proposed regulations dealing with issues not covered in the first set of proposed regulations.[6]

Eric Yauch, reporting on that presentation, indicated that Mr. Rimmke provided the following reason why Treasury wants both sets to be issued at the same time:

Treasury hopes to release the final regulations under section 163(j) at the same time as the proposed regs because the preamble to the final regs refers to them, Rimmke said at the District of Columbia Bar conference in Washington on January 23.[7]

What appears to be this promised set of proposed regulations was submitted to OIRA on February 7, 2020.[8] 

Presumably the final regulations will not be released by Treasury until OIRA has completed its review of these proposed regulations.  The final regulations took nearly one and a half months to clear the review process, and a number of other Treasury regulations are already under OIRA review at this point.  Thus, unless these regulations get fast-tracked by OIRA through the process or Treasury changes its mind and releases the final regulations first, we could very well see these regulations arrive towards the end of tax season or even after.

The final §163(j) regulations were reported to be over 550 pages long by Treasury Assistant Secretary for Tax Policy David Kautter in comments he made to the AICPA National Tax Conference in November 2019.[9]

[1] Rules Regarding Business Interest Limitation Under Section 163(j) [TCJA], Stage: Final Rule, RIN 1545-BO73, January 31, 2020, https://www.reginfo.gov/public/do/eoDetails?rrid=129917 (retrieved February 8, 2020)

[2] Limitation on Deduction for Business Interest Earned, Stage: Proposed Rule, RIN 1545-BP73, February 7, 2020, https://www.reginfo.gov/public/do/eoDetails?rrid=130070 (retrieved February 8, 2020)

[3] Rules Regarding Business Interest Limitation Under Section 163(j) [TCJA], Stage: Final Rule, RIN 1545-BO73, January 31, 2020

[4] Emily Foster, “Final Interest Regs Leave OIRA; No Sighting of Second Batch,” Tax Notes Today Federal, February 5, 2020, 2020 TNTF 24-1, https://www.taxnotes.com/tax-notes-today-federal/debt-instruments/final-interest-regs-leave-oira-no-sighting-second-batch/2020/02/05/2c4nh (retrieved February 8, 2020, subscription required)

[5] Emily Foster, “Final Interest Regs Leave OIRA; No Sighting of Second Batch,” Tax Notes Today Federal, February 5, 2020

[6] Emily Foster, “Final Interest Regs Leave OIRA; No Sighting of Second Batch,” Tax Notes Today Federal, February 5, 2020

[7] Eric Yauch, “Treasury Hopes to Release Final Interest Limit Rules as Package,” Tax Notes Today Federal, January 24, 2020, 2020 TNTF 16-3, https://www.taxnotes.com/tax-notes-today-federal/tax-cuts-and-jobs-act/treasury-hopes-release-final-interest-limit-rules-package/2020/01/24/2c3d3 (retrieved February 8, 2020, subscription required)

[8] Limitation on Deduction for Business Interest Earned, Stage: Proposed Rule, RIN 1545-BP73, February 7, 2020

[9] Kristen A. Parillo, “Carried Interest, SALT Among Imminent TCJA Guidance,” Tax Notes Today Federal, November 14, 2019, 2019 TNTF 221-1, https://www.taxnotes.com/tax-notes-today-federal/tax-cuts-and-jobs-act/carried-interest-salt-among-imminent-tcja-guidance/2019/11/14/2b451 (retrieved February 8, 2020, subscription required).