Sponsors (16)
The bill tightens the definition of adjusted taxable income to raise revenue and clarify enforcement, but it increases tax burdens and borrowing costs for debt‑financed businesses and creates transition and compliance costs.
Taxpayers and the federal government: narrowing the definition of "adjusted taxable income" will likely increase tax revenue by limiting excessive interest deductions and reducing interest‑stripping tax avoidance.
Financial institutions and the IRS: removing the added category and restoring a more explicit statutory list clarifies the law and can simplify enforcement and administration.
Businesses that rely on interest deductions (including many small businesses): will likely face higher taxable income and increased tax liabilities because fewer items are counted in adjusted taxable income.
Firms that finance operations with debt (borrowers and investors): could face higher after‑tax borrowing costs, which may discourage investment or prompt shifts in capital structures.
Taxpayers, tax professionals, and the IRS: will incur transition and compliance costs to implement the changed definition for tax years after 2025, requiring updates to planning, reporting, and enforcement systems.
Based on analysis of 2 sections of legislative text.
Removes a recently added item from the definition of 'adjusted taxable income' under the business interest limitation, changing how business interest deductions are calculated for tax years after 2025.
Introduced March 26, 2026 by Ron Estes · Last progress March 26, 2026
Removes a recent change to the Internal Revenue Code definition of “adjusted taxable income” used to calculate the business interest limitation under section 163(j), by eliminating an enumerated category added by a prior law. The change takes effect for taxable years beginning after December 31, 2025 and narrows the statutory list of items that are included in adjusted taxable income for purposes of limiting business interest deductions. The result is a technical but meaningful change to how much business interest can be deducted: by excluding the deleted category from adjusted taxable income, the interest limitation formula may become tighter for some businesses, potentially increasing taxable income or deferring interest deductions. No new spending or administrative programs are created.