The U.S. Internal Revenue Service (IRS) moved on Tuesday to ease thetax burdens of private equity portfolio companies and heavilyindebted industries.
Prior to President Donald Trump's 2017 tax-code overhaul,interest expenses were generally fully deductible. The Trump taxlaw capped tax deductions for debt interest payments at 30 percentof EBITDA (earnings before interest, taxes, depreciation, andamortization).
The new arrangement, laid out in 575 pages, reflects a temporarybump in the cap, to 50 percent through year-end. In addition, theTreasury will no longer apply a limit on some transactions thatdon't officially take the form of a loan, but that potentiallycould be used to skirt the deduction cap. Included in thatclassification are debt-issuance costs, commitment fees, and somehedging gains and losses.
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