Manufacturers, Telecoms Will Save From Tax Law’s Interest Move

A new, long-sought $60 billion tax break on companies’ interest payments stands to save cable and telecommunications providers like Charter Communications and drug makers like AbbVie millions of dollars a year.

The move, part of the tax-and-spending law enacted by Congress and President Donald Trump this month, eases a limit on deducting business interest, so more interest on corporate debt will be deductible and less will be taxable.

Companies in capital-intensive industries like manufacturing and telecom will benefit most, along with intellectual property-heavy businesses like drug makers and technology companies and private-equity firms that invest in companies with large interest costs.

“It’s been a top priority of ours for a number of years,” said Charles Crain, managing vice president of policy for the National Association of Manufacturers. Advocates of the relaxed cap say it will free up companies to pursue more capital investments and job creation.

Not everyone is a fan, with some contending that the change is simply a giveaway to corporate America and creates a tax incentive for companies to load up on excessive debt. The relaxed interest-deduction cap is “a drastic loosening of a crucial economic and tax-integrity safeguard,” said Zorka Milin, policy director at the Financial Accountability and Corporate Transparency Coalition.

Spokespeople for Charter and AbbVie declined to comment.

More Generous Deductions

Before the change, companies’ interest deductions were capped at, essentially, 30% of their EBIT, or earnings before interest and taxes. Now, companies can take depreciation and amortization costs out of that calculation—the costs that reflect the decline in the value of their assets over time—and the cap becomes essentially 30% of EBITDA, or earnings before interest, taxes, depreciation, and amortization.

EBITDA is larger than EBIT, so the change allows companies to shield more of their interest from taxes—hundreds of millions of dollars worth of interest in some cases, leading to millions in tax savings. Congress’s Joint Committee on Taxation estimates the change will lower federal revenues by $60.5 billion over 10 years. Companies can still carry forward any nondeductible interest to future years, so firms don’t lose all benefits on interest above the cap.

EBITDA was the basis for calculating the cap before it switched to EBIT in 2022, and companies have pushed since then to go back to the looser version. NAM, Charter, and many other companies and business groups have lobbied Congress on that issue, according to their disclosure reports.

Manufacturers and telecom companies benefit from the new interest-deduction formula because they have invested heavily in equipment and thus have significant depreciation costs. Pharmaceutical and high-tech companies also benefit because they rely on intangible assets like patents and brands that generate large amortization costs.

Those sectors are “where you’re going to see the immediate benefit,” said Ellen Martin, principal at Grant Thornton’s Washington National Tax Office.

Who Stands to Benefit

The full interest-deductibility calculation is complex, and it’s hard to determine exactly how much any individual company benefits from the relaxed cap. But a good way to find companies that stand to gain is to look for those with high interest relative to earnings, and high depreciation and amortization—leading to interest of over 30% of EBIT, but under 30% of EBITDA.

Charter, for instance, reported $5.2 billion in net interest expense in 2024—about 41% of its EBIT based on numbers from its annual report, over the old cap. But since the company had $8.7 billion of depreciation and amortization costs, net interest expense was only 24% of EBITDA, under the new cap.

AbbVie had $2.8 billion in gross interest expense, according to its annual report, about 48% of its 2024 EBIT. After taking out $8.4 billion in depreciation and amortization, interest was only 20% of EBITDA.

Many other companies may benefit similarly from relaxing the cap, from medical-products maker Baxter International to tire maker Goodyear Tire & Rubber to home-alarm provider ADT. Though some, like Goodyear, have been able to record net US tax benefits, because they’ve been able to use carryforwards and other tax benefits to cover their US tax liabilities. A Baxter spokesperson couldn’t be reached for comment. A Goodyear spokesperson declined to comment; an ADT spokesperson said ADT is “currently evaluating the potential implications for our business” of the change.

Some companies wanted the switch even if they weren’t over the old, tighter cap. Higher interest rates in recent years forced them to pay more in interest, and they wanted to make sure they remained comfortably under the limit.

The looser limit is “not just going to affect firms who are at or above the cap, it’s going to affect anyone who has that concern about their future tax liability,” said Garrett Watson, director of policy analysis at the Tax Foundation.

Counterbalancing Changes

But Congress also made other changes that partly counterbalance the benefit from the relaxed cap. Among them: companies must count any capitalized interest when calculating whether they’re over the cap. They must also exclude certain portions of their foreign income, thus lowering the income base and the level of the cap. The JCT says those changes would bring in about $21.7 billion over 10 years, reversing more than a third of the looser cap’s benefit.

Congress had to find ways to pay for some of the tax cuts it made, Crain said, and this “sort of helps them make their math work.”

Martin said that after the 2022 switch to the EBIT-based cap, a lot of companies chose to capitalize some of their interest to try to get around it. The new provision “directly addresses that planning opportunity,” she said.