The IRS has released final regulations and a new set of proposed regulations on the deduction for business interest, which was modified by the 2017 tax reform legislation. The new proposed IRS regulations on the business interest expense implement many of the new CARES Act provisions designed to help small business owners in 2020 and future years. While the final regulations largely mirror earlier proposed rules, one significant change relaxes the previous definition of “business interest”.
Under the proposed regulations, interest included commitment fees, debt issuance costs, guaranteed payments and other “substitute” interest costs. Under the final rules, commitment fees and debt issuance costs are excluded from the definition of interest.
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