The Practical Effect of Proposed Tax Reform’s Limitation on the Deductibility of Interest by a Business

[Contributed by Todd Ganos of IWC Family Offices]

On November 2, 2017, the House of Representatives Ways and Means Committee released H.R. 1 — the proposed Tax Cuts and Jobs Act. Section 3301 of the Act imposes a limitation on the amount of interest a business can deduct. The limitation is 30 percent of a firm’s taxable income (which, as described, is the equivalent of Earnings Before Interest, Taxes, Depreciation, and Amortization or EBITDA). The limitation would not apply to certain companies that are regulated public utilities or in the real estate trade. The limitation would also not apply to companies with annual revenues below $25 million.

To the extent that a middle-market company is subject to the limitation, many owners, professional advisors, investment bankers, lenders, and investors might wonder to what practical effect the limitation has…[read full whitepaper]

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About Exit Planning Institute:

EPI LogoThe Exit Planning Institute (EPI) is an education company that provides exit planning education to advisors and middle market business owners.  We view exit planning as a strategy, not an event.

EPI leads the professional services profession with the best industry content, ongoing support, and owner education platform, all of which align with our mission: Change the outcome.

Only 2 out of every 10 businesses that come to market actually sell.  We want to increase the number of saleable businesses.

Only 30% of family businesses successfully transition to the second generation, only 12% transfer to the third, and the success rates diminish from there.  We want to improve those intergenerational transitions.

Of those that succeed in the sale of their business, 75% experience “profound regret” within one year of exiting their business.  We want to understand why and create strategies that achieve profound success, wealth, and satisfaction.

EPI is an education company, powered by an elite community of top advisors and owners, all focused toward creating a valuable, transferable future for the business marketplace.

 

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