Treasury Mulls Guidance on Interest Deduction, Base Erosion Tax

The Treasury Department is thinking about guidance that would coordinate interest deduction limitation rules with a US tax on payments made to foreign subsidiaries to determine the treatment of capitalized interest expenses.

“We are considering guidance in this area,” Jared Hermann, attorney-adviser at Treasury, said at the 2026 DC Bar Tax Conference.

Republicans’ $3.4 trillion tax-and-spending law enacted in the summer made several changes to the interest deduction limitation rules under Section 163(j) and the base erosion and anti-abuse tax, or BEAT, which was originally passed as part of the GOP’s 2017 tax overhaul. It’s meant to reduce profit-shifting payments ...