SECTION 4. C CORPORATION

BUSINESS INTEREST EXPENSE AND INCOME

Consistent with congressional intent as reflected in the Conference Report, the Treasury Department and the IRS intend to issue regulations clarifying that, solely for purposes of section 163(j), as amended by the Act, in the case of a taxpayer that is a C corporation, all interest paid or accrued by the C corporation on indebtedness of such C corporation will be business interest within the meaning of section 163(j)(5), and all interest on indebtedness held by the C corporation that is includible in gross income of such C corporation

Bulletin No. 2018–16 493 April 16, 2018

will be business interest income within the meaning of section 163(j)(6). The regulations described in the foregoing sentence will not apply to a corporation that is an S corporation as defined in section 1361(a)(1). Regulations also will address whether and to what extent interest paid, accrued, or includible in gross income by a non-corporate entity such as a partnership in which a C corporation holds an interest is properly characterized, to such C corporation, as business interest within the meaning of section 163(j)(5) or business interest income within the meaning of section 163(j)(6).

For further information regarding this issue, contact John B. Lovelace at (202) 317-4723 (not a toll-free number).