Sec. 3301. Interest
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Section 163(j) is amended to read as follows: In the case of any taxpayer for any taxable year, the amount allowed as a deduction under this chapter for business interest shall not exceed the sum of— the business interest income of such taxpayer for such taxable year, 30 percent of the adjusted taxable income of such taxpayer for such taxable year, plus the floor plan financing interest of such taxpayer for such taxable year. The amount determined under subparagraph
(B)(after any increases in such amount under paragraph (3)(A)(iii)) shall not be less than zero. For exemption for certain small businesses, see the amendment made by section 3203 of the Tax Cuts and Jobs Act . In the case of any partnership— this subsection shall be applied at the partnership level and any deduction for business interest shall be taken into account in determining the non-separately stated taxable income or loss of the partnership, the adjusted taxable income of each partner of such partnership shall be determined without regard to such partner’s distributive share of the non-separately stated taxable income or loss of such partnership, and the amount determined under paragraph (1)(B) with respect to each partner of such partnership shall be increased by such partner’s distributive share of such partnership’s excess amount. The term excess amount means, with respect to any partnership, the excess (if any) of— 30 percent of the adjusted taxable income of the partnership, over the amount (if any) by which the business interest of the partnership, reduced by floor plan financing interest, exceeds the business interest income of the partnership. Rules similar to the rules of subparagraphs
(A)and
(B)shall apply with respect to any S corporation and its shareholders. For purposes of this subsection, the term business interest means any interest paid or accrued on indebtedness properly allocable to a trade or business. Such term shall not include investment interest (within the meaning of subsection (d)). For purposes of this subsection, the term business interest income means the amount of interest includible in the gross income of the taxpayer for the taxable year which is properly allocable to a trade or business. Such term shall not include investment income (within the meaning of subsection (d)). For purposes of this subsection, the term adjusted taxable income means the taxable income of the taxpayer— computed without regard to— any item of income, gain, deduction, or loss which is not properly allocable to a trade or business, any business interest or business interest income, the amount of any net operating loss deduction under section 172, and any deduction allowable for depreciation, amortization, or depletion, and computed with such other adjustments as the Secretary may provide. For purposes of this subsection, the term trade or business shall not include— the trade or business of performing services as an employee, a real property trade or business (as such term is defined in section 469(c)(7)(C)), or the trade or business of the furnishing or sale of— electrical energy, water, or sewage disposal services, gas or steam through a local distribution system, or transportation of gas or steam by pipeline, if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof. For carryforward of interest disallowed under paragraph (1), see subsection (o). For purposes of this subsection— The term floor plan financing interest means interest paid or accrued on floor plan financing indebtedness. The term floor plan financing indebtedness means indebtedness— used to finance the acquisition of motor vehicles held for sale to retail customers, and secured by the inventory so acquired. The term motor vehicle means a motor vehicle that is any of the following: An automobile. A truck. A recreational vehicle. A motorcycle. A boat. Farm machinery or equipment. Construction machinery or equipment. . Section 163 , after amendment by section 4302(a) and before amendment by section 4302(b), is amended by inserting after subsection
(n)the following new subsection: The amount of any business interest not allowed as a deduction for any taxable year by reason of subsection
(j)shall be treated as business interest paid or accrued in the succeeding taxable year. Business interest paid or accrued in any taxable year (determined without regard to the preceding sentence) shall not be carried past the 5th taxable year following such taxable year, determined by treating business interest as allowed as a deduction on a first-in, first-out basis. . Section 381(c) is amended by inserting after paragraph
(19)the following new paragraph: The carryover of disallowed interest described in section 163(o) to taxable years ending after the date of distribution or transfer. . Section 382(d) is amended by adding at the end the following new paragraph: The term pre-change loss shall include any carryover of disallowed interest described in section 163(o) under rules similar to the rules of paragraph (1). . Section 382(k)(1) is amended by inserting after the first sentence the following: Such term shall include any corporation entitled to use a carryforward of disallowed interest described in section 381(c)(20). The amendments made by this section shall apply to taxable years beginning after December 31, 2017.