SECTION 2. BACKGROUND

.01 On December 22, 2017, section 163(j) was amended by the Tax Cuts and Jobs Act, Pub. L. 115–97 (TCJA). Section 163(j), as amended by the TCJA, provides new rules limiting the amount of business interest expense that can be deducted for taxable years beginning after December 31, 2017. See TCJA § 13301(a). .02 Under section 163(j)(1), the amount allowed as a deduction for business interest expense is limited to the sum of: (1) the taxpayer’s business interest income (as defined in section 163(j)(6)) for the taxable year; (2) 30 percent of the taxpayer’s adjusted taxable income (as defined in section 163(j)(8)) for such taxable year; and (3) the taxpayer’s floor plan financing interest (as defined in section 163(j)(9)) for such taxable year.

.03 The limitation under section 163(j) on the deductibility of business interest expense applies to all taxpayers with business interest (as defined in section 163(j)(5)), except for certain taxpayers (other than tax shelters under section 448(a)(3)) that meet the gross receipts test in section 448(c).

.04 Section 163(j)(5) generally provides that the term “business interest” means any interest properly allocable to a trade or business. Section 163(j)(7)(A)(ii)

provides that, for purposes of the limitation on the deduction for business interest, the term “trade or business” does not include an “electing real property trade or business.” Thus, for purposes of section 163(j), interest expense that is properly allocable to an electing real property trade or business is not properly allocable to a trade or business, and is not business interest expense that is subject to section 163(j)(1). .05 The term “electing real property trade or business” under section 163(j) (7)(B) means any trade or business that is described in section 469(c)(7)(C) that makes an election to be an electing real property trade or business.

.06 Section 168(g)(1)(F) provides that an electing real property trade or business (within the meaning of section 163(j)(7)(B)) must use the alternative depreciation system for property described in section 168(g)(8). See section 163(j)(10)(A).

.07 Section 469(c)(7)(C) defines a real property trade or business as any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.

.08 The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) are aware that there may be uncertainty as to whether certain infrastructure arrangements between private persons and governmental entities under which private persons maintain or provide other services with respect to core infrastructure property such as roads, bridges, or other similar property are included in the definition of a real property trade or business under section 469(c)(7)(C). .09 In light of the concerns relating to certain infrastructure arrangements in the context of section 163(j), this revenue procedure provides a safe harbor that allows taxpayers to treat certain trades or businesses that are conducted in connection with the designing, building, managing, operating, or maintaining of certain core infrastructure projects as real property trades or businesses for purposes of qualifying as an electing real property trade or business under section 163(j)(7)(B) (infrastructure safe harbor).

.10 The infrastructure safe harbor in this revenue procedure is based on the proposed

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signed, built, constructed, reconstructed, developed, or redeveloped.

.05 No inference . No inference should be drawn from this revenue procedure regarding the definition of a real property trade or business for purposes of section 469.