Part III is completed by an S corporation that is subject to

the section 163(j) limitation. The S corporation’s excess taxable income and excess business interest income are allocated to the shareholders’ pro rata after the S corporation’s section 163(j) limitation is determined and are not carried forward by the S corporation.

See the Instructions for Form 1120-S for how to report the excess taxable income and the excess business interest income to the shareholders.

Any taxpayer that is required to complete Part I and is a partner in a partnership that is subject to the section 163(j) limitation must complete Schedule A before completing Part I. For a foreign person that is not a relevant foreign corporation with an interest in a partnership engaged in a U.S. trade or business, the amount of excess items is limited to ECI. For such foreign partners, report on Schedule A only the ECI portion of the excess section 163(j) amounts and attach a statement showing how the

ECI portion of the excess section 163(j) amounts were determined. See 2020 Proposed Regulations section 1.163(j)-8(c) for additional information.

On line 43, enter the amount of current year excess business interest expense in column (c), current year excess taxable income in column (f), and the current year excess business interest income in column (g), reported to the partner on Schedule K-1 for each partnership.

Do not include excess business interest expense that is suspended under the basis limitation rules of section 704(d). See Regulations section 1.163(j)-6(h) for basis adjustment calculations and ordering rules for losses under section 704(d).

Line 43, column (c). Current year. Reduce the current year excess business interest expense by the amount of negative section 163(j) expense that relates to the current year excess business interest expense, and attach a statement to the Form 8990 identifying the partnership name and amount of negative 163(j) expense. See Regulations section 163(j)-6(h).

Line 43, column (d). Prior year carryforward. From the prior year’s Form 8990, enter the amount from line 43, column (i). Increase the prior year carryover by the amount of negative section 163(j) expense that is no longer suspended, or if applicable, reduce the prior year excess business interest expense by the amount of negative section 163(j) expense that relates to the prior year excess business interest expense. Attach a statement to the Form 8990 identifying the partnership name and a description of the adjustments and the amounts. See Regulations section 1.163(j)-6(h).

Line 43, column (h). Excess business interest ex- pense treated as paid or accrued. Enter the lesser of:

• The total excess business interest expense amount in column (e), or

• The current year excess taxable income in column (f) plus the current year excess business interest income in column (g) from the same partnership.

In addition, add any of the applicable amounts listed below, and attach a statement to the Form 8990 identifying the partnership name, amount, and description of addition.

• The amount of excess business interest expense carryover on line 43(d) if the partnership became an exempt entity during the tax year. See Regulations section 1.163(j)-6(m)(3).

• Any business interest expense that is treated in the current tax year, as paid or accrued under the transition rule of regulation for trading partnerships. See Regulations section 1.163(j)-6(c)(3).

Line 43, column (i). Current year excess business in- terest expense carryforward. Columns 43(e) minus (h), less any excess business interest expense that previously reduced partner basis that you are required to make a basis adjustment to upon disposition of partnership interest. See Regulations section 1.163(j)-6(h)(3).

Line 44, column (f). Total current year excess taxable income. If the partner is subject to the section 163(j) limitation, add the amounts entered on line 43, column (f),

12 Instructions for Form 8990 (Rev. 12-2025)

for all partnerships listed. Enter this total amount on Part I, line 14.

Line 44, column (g). Total current year excess busi- ness interest income. For the partners subject to the section 163(j) limitation, add the amounts entered on line 43, column (g), for all partnerships listed. Combine this total amount with Schedule B, line 46, column (d), and enter the total on Part I, line 24.

Line 44, column (h). Total excess business interest expense treated as paid or accrued. For the partners subject to the section 163(j) limitation, add the amounts entered on line 43, column (h), for all partnerships listed. Enter this total amount on Part I, line 3. For partners not subject to the section 163(j) limitation, include this amount on Part I, line 30.

Any taxpayer that is required to complete Part I and is a shareholder in an S corporation that is subject to the section 163(j) limitation must complete Schedule B before completing Part I.

On line 45, enter the amount of current year excess taxable income in column (c) and current year excess business interest income in column (d), reported to the shareholder on Schedule K-1 for each S corporation.

Line 46, column (c). Total current year excess taxable income. Add the amounts entered on line 45, column (c), for all S corporations listed. Enter this total amount on Part I, line 15.

Line 46, column (d). Total current year excess busi- ness interest income. Add the amounts entered on line 45, column (d), for all S corporations listed. Combine this total amount with Schedule A, line 44, column (g) and enter the total on Part I, line 24.

The Regulations provide guidance regarding how a partnership subject to the section 163(j) limitation must allocate its deductible business interest expense and section 163(j) excess items, if any, among its partners. The Regulations provide that deductible business interest expense and section 163(j) excess items must be allocated in accordance with the 11-step computation shown in Worksheets A and B. See Regulations section 1.163(j)-6(f). The partnership should use Worksheets A and B in these instructions and is responsible for keeping records that compute the allocation. Partnerships that allocate all section 163(j) items in step 2 proportionately do not need to use Worksheets A and B.

Lines 1 through 7 of Worksheet A are taken from the partnership’s Form 8990, which it must complete first. Lines 8 through 10 reflect the manner in which the partnership allocated its ATI, business interest income, and business interest expense to its partners. Only items that were taken into account in lines 1 through 3 are taken into account in lines 8 through 10. As a result, section 743(b) adjustments, section 704(c) remedial allocations, allocations of investment income and expense, and amounts determined for the partner under Regulations section 1.882-5 are not taken into account in lines 8 through 10. See Regulations section 1.163(j)-6(f)(2)(ii) for the definitions of “allocable ATI” (line 8), “allocable business interest income” (line 9), and “allocable business interest expense” (line 10). All of the information necessary to complete the rest of Worksheets A and B is contained in lines 1 through 10. See the Instructions for Form 1065 for how the partnership reports the excess business interest expense, excess taxable income, and excess business interest income to the partners.

The calculation in Regulations sections 1.163(j)-6(f)(2) (i) through (xi) is solely for determining each partner’s allocable share of deductible business interest expense, excess business interest expense, excess taxable income, and excess business interest income. Accordingly, no rule set forth in Regulations section 1.163(j)-6(f)(2) prohibits a partnership from making an allocation to a partner that is otherwise permitted under section 704 and the regulations thereunder.

Worksheet C is used to determine eligibility for the safe-harbor election under Regulations section 1.163(j)-7(h). Fill out Section 1 to indicate the type of election. Sections 2, 3, 4, and 5 determine eligibility. If the safe-harbor election is made for a stand-alone applicable CFC, the U.S. shareholders that file Form 8990 for the stand-alone applicable CFC must attach Worksheet C to their tax returns together with the Form 8990 of the stand-alone applicable CFC and complete Part I of the stand-alone applicable CFC’s Form 8990 in accordance with these instructions for Worksheet C. If the safe-harbor election is made for a CFC group, the U.S. shareholders that file the CFC group’s Form 8990 must attach Worksheet C to their tax return together with the CFC group’s Form 8990 and complete Part I of the CFC group’s Form 8990 in accordance with these instructions for Worksheet C.

Complete Worksheet C before completing Part I of Form 8990. Complete lines A through D of Form 8990 in accordance with the instructions discussed earlier in Specific Instructions and complete the remainder of Form 8990 in accordance with the instructions below. If a safe-harbor election is made, Schedules A and B should not be completed.

A safe-harbor election may be made only for a stand-alone applicable CFC or for a CFC group. Thus, for example, it may not be made for an applicable CFC that is a specified group member if a CFC group election is not in

Instructions for Form 8990 (Rev. 12-2025) 13

effect, and it may not be made for any CFC group member unless it is made with respect to the CFC group as a whole.

For purposes of the safe-harbor election, all items must be determined using the U.S. dollar. If business interest income, business interest expense, or any items that are taken into account in computing QTTI are maintained in a currency other than the U.S. dollar, then those items must be translated into the U.S. dollar using the average exchange rate for the tax year (or specified year, as applicable).

Line A. Stand-alone election. Check the box if the election is made for a stand-alone applicable CFC. A stand-alone applicable CFC is an applicable CFC that is not a specified group member and therefore not eligible to be a CFC group member.

Line B. CFC group election. Check the box if the election is made for a CFC group.

Line C. If a CFC group election has been made, for the specified period, does any CFC group member have any pre-group disallowed business interest expense carryforward? If yes, the CFC group is not eligible for the safe-harbor.

Line 1. Business interest income. Enter the stand-alone applicable CFC’s business interest income if a stand-alone election is being calculated. Enter the CFC group’s business interest income if a CFC group election is being calculated. Also enter the amount from line 1 on Form 8990, line 25.

Line 2. Business interest expense. Enter the stand-alone applicable CFC’s business interest expense if a stand-alone election is being calculated. Enter the CFC group’s business interest expense if a CFC group election is being calculated. Also enter the amount from line 2 on Form 8990, line 5.

Line 3. Subtract line 2 from line 1. If the amount on line 3 is greater than or equal to zero, the safe-harbor requirement is met if all other eligibility requirements are met. Check “Yes” on Form 8990, line D. Skip lines 4 through 14, and continue to line 15. Leave the remaining lines of Form 8990, Part I (all lines other than line 5 and line 25) blank.

If the amount on line 3 is less than zero, continue to line 4.

Line 4. Qualified tentative taxable income (QTTI). Enter the stand-alone applicable CFC’s QTTI if a stand-alone election is being calculated. Enter the CFC group’s QTTI if a CFC group election is being calculated. Also enter the amount from line 4 on Form 8990, line 6.

With respect to a stand-alone applicable CFC, QTTI means an applicable CFC’s tentative taxable income for the tax year, determined by taking into account only items properly allocable to a non-excepted trade or business. With respect to a CFC group, QTTI means the sum of each CFC group member’s tentative taxable income for the specified tax year, determined by taking into account only items properly allocable to a non-excepted trade or business. See Regulations section 1.163(j)-7(h)(4).

Line 5. Thirty percent of QTTI. Multiply QTTI from line 4 by 30% (0.30).

General instructions for lines 6 through 9. The amounts on lines 6 through 9 are determined based on the amounts that would be included and deducted by a hypothetical domestic corporation if the domestic corporation had a tax year ending on the last date of the tax year of the stand-alone applicable CFC (or specified period of the CFC group), it wholly owned the stand-alone applicable CFC throughout the CFC’s tax year (or wholly owned each CFC group member throughout the CFC group member’s specified tax year), it did not own any assets other than stock in the stand-alone applicable CFC (or CFC group members), and it had no other items of income, gain, deduction, or loss. Additionally, the amounts on lines 6 through 9 are determined by taking into account any elections that are made with respect to the applicable CFC(s), including under Regulations section 1.954-1(d)(5) (relating to the subpart F high-tax exception) and Regulations section 1.951A-2(c)(7)(viii) (relating to the GILTI high-tax exclusion). These amounts are also determined without regard to any section 163(j) limitation on business interest expense and without regard to any disallowed business interest expense carryovers. In addition, those amounts are determined by only taking into account items of the applicable CFC(s) that are properly allocable to a non-excepted trade or business under Regulations section 1.163(j)-10. See Regulations section 1.163(j)-7(h)(3).

Line 6. Section 951(a)(1)(A) amount. Include on line 6 amounts that would be includable by the hypothetical domestic corporation under section 951(a)(1)(A).

Line 7. Section 951A(a) amount. Include on line 7 amounts that would be includable by the hypothetical domestic corporation under section 951A(a).

Line 8. Section 250 amount. Include on line 8 any deduction that would be allowed for the hypothetical domestic corporation under section 250(a)(1)(B)(i).

Line 9. Section 245A amount. Include on line 9 any deduction that would be allowed for the hypothetical domestic corporation under section 245A (by reason of section 964(e)(4)).

Line 10. Total eligible amount. Combine lines 6 through 9. Enter the amount on Form 8990, line 22.

Line 11. Thirty percent of eligible amount. Multiply the eligible amount (line 10) by 30% (0.30).

Line 12. Enter the lesser of line 5 or line 11.

Line 13. Business interest expense. Enter the amount from line 2.

Line 14. Subtract line 13 from line 12. If the amount on line 14 is greater than or equal to zero, the safe-harbor requirement is met if all other eligibility requirements are met. Check “Yes” box on Form 8990, line D, and continue to line 15. Leave the remaining lines of Form 8990, Part I (all lines other than lines 5, 6, 22, and 25) blank.

If the amount on line 14 is less than zero, the safe-harbor eligibility requirements are not met.

14 Instructions for Form 8990 (Rev. 12-2025)

Line 15. Name(s) of all designated U.S. persons. Enter the name(s) of all designated U.S. persons. Attach an additional statement if necessary.

Line 16. Taxpayer identification number(s) of line 15. Enter the taxpayer identification number(s) for all persons listed on line 15. Attach an additional statement if necessary.

Line 17. Tax year or specified period (as applicable). Enter the stand-alone applicable CFC’s tax year or the CFC group’s specified period to which the election relates.

Average Annual Gross Receipts Worksheet Per Section 448(c)

Column A Column B Column C

1.Annual gross receipts $ $ $

2.Plus annual gross receipts of related entities per aggregate rules $ $ $

3.Total annual gross receipts $ $ $

4.Average annual gross receipts (line 3 columns A + B + C divided by 3) $

1st preceding

tax year

2nd preceding

tax year

3rd preceding

tax year

Instructions for Form 8990 (Rev. 12-2025) 15

Determination of Each Partner’s Deductible Business Interest Expense

and Section 163(j) Excess Items—Worksheet A Keep for Your Records

and Section 163(j) Excess Items—Worksheet A Keep for Your Records

16 Instructions for Form 8990 (Rev. 12-2025)

Determination of Each Partner’s Deductible Business Interest Expense and Section 163(j) Excess Items—Worksheet A— Continued Keep for Your Records

Instructions for Form 8990 (Rev. 12-2025) 17

Determination of Each Partner’s Relevant

Section 163(j) Items—Worksheet B Keep for Your Records

12.

Divide line 4 of Worksheet B by the line 4 total column amount
of Worksheet B. (If the line 4 total column amount of
Worksheet B equals zero, enter -0-.) .
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**13.**Multiply line 12 of Worksheet B by the line 25 total column
amount of Worksheet A
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**14.**If line 4 of Worksheet B is greater than zero, enter the amount
from line 26 of Worksheet A. Otherwise, enter -0- .
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15.

Subtract line 14 of Worksheet B from line 13 of Worksheet B.
(If zero or less, enter -0-.) Enter the amount(s) on line 28 of
Worksheet A .
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16.

Subtract line 13 of Worksheet B from line 14 of Worksheet B.
(If zero or less, enter -0-.) Enter the amount(s) on line 29 of
Worksheet A .
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17.

If line 4 of Worksheet B equals zero, enter the amount from
line 26 of Worksheet A. Otherwise, enter -0-. Enter the
amount(s) on line 30 of Worksheet A .
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18 Instructions for Form 8990 (Rev. 12-2025)

Stand-Alone Applicable CFC/CFC Group Safe Harbor Election Section 163(j) Items—Worksheet C Attach to Your Return

Instructions for Form 8990 (Rev. 12-2025) 19

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for business taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the estimates shown in the instructions for their business income tax return.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

20 Instructions for Form 8990 (Rev. 12-2025)