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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