Sponsors (20)
The bill tightens the rules on interest deductions to raise revenue and clarify enforcement, at the trade-off of higher tax burdens and borrowing costs for debt-financed firms and transitional compliance costs for taxpayers and the IRS.
Lenders and the federal government: restoring a narrower definition of 'adjusted taxable income' reduces abusive interest stripping and is likely to increase tax revenue collected by the Treasury.
IRS administration and financial institutions: removing the added category clarifies the statutory list and can simplify enforcement and interpretation for tax administrators.
Companies that rely on interest deductions (including many small and debt-financed firms): will likely face higher taxable income and increased tax liability because fewer interest items count in 'adjusted taxable income.'
Debt-financed firms and their owners/investors: higher after-tax cost of borrowing may reduce investment, slow business expansion, or push firms to change capital structures away from debt.
Taxpayers, tax professionals, and the IRS: the change creates transition and compliance costs for applying the new definition (tax-year changes after 2025), including updates to planning, reporting, and enforcement systems.
Based on analysis of 2 sections of legislative text.
Removes a recently added clause from the IRC definition of “adjusted taxable income,” changing how the business interest limitation under IRC 163(j) is calculated.
Removes a recent amendment to the Internal Revenue Code that had modified the definition of “adjusted taxable income” used to calculate the business interest limitation under IRC 163(j). The change reverses a specific added clause, narrowing the statutory list of items that can be excluded from adjusted taxable income and thereby changing how much interest expense businesses can deduct for taxable years beginning after December 31, 2025.
Official title: To amend the Internal Revenue Code of 1986 to repeal the modification of the definition of adjusted taxable income for purposes of the limitation on business interest.
Introduced March 26, 2026 by Ron Estes · Last progress March 26, 2026