Sponsors (24)
The bill tightens interest-deduction rules to raise revenue and clarify enforcement, but it increases tax bills and borrowing costs for indebted businesses and imposes transition and compliance costs.
Lenders and the federal budget: narrowing the definition of 'adjusted taxable income' limits excessive interest deductions, reduces interest-stripping tax avoidance, and is likely to increase federal tax revenue.
IRS administration and financial institutions: returning to a clearer, explicitly enumerated definition removes the added category and should simplify statutory interpretation and enforcement for the IRS and regulated institutions.
Businesses and some taxpayers: tightening the items included in 'adjusted taxable income' will raise taxable income and tax liability for companies that rely on interest deductions.
Firms that borrow to finance operations: higher after-tax cost of debt could discourage investment, slow business expansion, or push firms to change capital structures toward less efficient funding.
Taxpayers and the IRS: implementing the changed definition for tax years after 2025 will create transition and compliance costs, requiring updates to tax planning, reporting systems, and administrative processes.
Based on analysis of 2 sections of legislative text.
Removes a clause from the statutory definition of "adjusted taxable income" under IRC §163(j), expanding allowable business interest deductions for taxable years after 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
Deletes a recent amendment to the Internal Revenue Code that narrowed the statutory definition of "adjusted taxable income" used to compute the business interest limitation, effectively restoring a broader measure of taxable income for interest deduction purposes. The change applies to taxable years beginning after December 31, 2025. The measure is a targeted tax-law change (one substantive provision plus a short title) that increases allowable business interest deductions compared with the currently amended rule by removing an explicit category from the statutory list that had reduced adjusted taxable income.