The U.S. Internal Revenue Service moved on Tuesday to ease the tax burdens of private equity portfolio companies and heavily indebted industries. Under new rules, the IRS loosened a 2017 restriction that had capped tax deductions for debt interest payments at 30% of earnings before interest, taxes, depreciation and amortization, or EBITDA. The announcement reflects a temporary bump in the cap to 50% through year-end, as enacted by Congress in its March stimulus bill.Prior to President Donald Trump’s 2017 tax-code overhaul, interest expenses were generally fully deductible. With the new arrangement, laid out in 575 pages, the Treasury also no longer applies a limit on some transactions that don’t officially take the form of a loan, but potentially could be used to skirt the deduction cap. Included in that classification are debt-issuance costs, commitment fees and some hedging gains and losses.
