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Muoto 8990, Limitation on Business Interest Expense under Section 163(j)

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  • Muoto 8990 - Liiketoiminnan edun rajoittaminen osan 163(j) mukaisesti
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Department of the Treasury  
Internal Revenue Service  
Instructions for Form 8990  
Limitation on Business Interest Expense Under Section 163(j)  
(Rev. December 2022)  
Section references are to the Internal Revenue  
Code unless otherwise noted.  
provide certain information so that the  
partner or shareholder can complete their  
limitation, later.  
Who Must File  
A taxpayer (including, for example, an  
individual, corporation, partnership, S  
corporation) with business interest  
Future Developments  
expense; a disallowed business interest  
expense carryforward; or current year or  
prior year excess business interest  
expense must generally file Form 8990,  
unless an exclusion from filing applies.  
For the latest information about  
developments related to Form 8990 and  
its instructions, such as legislation  
enacted after they were published, go to  
Coordination With Other  
Limitations  
Categorization and allocation of inter-  
est expense. Current year interest  
expense must be categorized under  
Temporary Regulations section 1.163-8T  
(for example, as investment interest,  
personal interest, or business interest)  
before computing the section 163(j)  
limitation on the deduction for business  
interest expense. Also, see Proposed  
Regulations section 1.163-14 ((85 FR  
56846) (2020 Proposed Regulations) for  
rules on allocating interest expense  
associated with debt proceeds for  
pass-through entities. Only business  
interest expense is subject to the section  
163(j) limitation.  
For purposes of the section 163(j)  
limitation only, business interest expense  
refers to interest expense properly  
allocable to trades or businesses that are  
not excepted trades or businesses. See  
for allocating interest expense between  
excepted and non-excepted trades or  
businesses before computing the section  
163(j) limitation.  
A pass-through entity allocating excess  
taxable income or excess business  
interest income to its owners must file  
Form 8990, regardless of whether it has  
any interest expense.  
What’s New  
Change in adjusted taxable income  
(ATI) computation. For tax years  
beginning after 2021, the computation for  
ATI is computed with the deductions for  
depreciation, amortization, and depletion.  
Do not add back the deductions for  
depreciation, amortization, or depletion  
attributable to a trade or business.  
A regulated investment company that  
pays section 163(j) interest dividends (see  
Regulations sections 1.163(j)-1(b)(22)(iii)  
(F) and 1.163(j)-1(b)(35)) must file Form  
8990.  
New worksheet. A new worksheet has  
been added to the instructions. Worksheet  
C is used to determine eligibility for the  
safe-harbor election under Regulations  
section 1.163(j)-7(h). See Worksheet  
A taxpayer that is a U.S. shareholder of  
an applicable controlled foreign  
corporation (CFC) that has business  
interest expense, disallowed business  
interest expense carryforward, or is part of  
a CFC group must generally apply section  
163(j) to the applicable CFC and attach a  
Form 8990 with each Form 5471. See  
Regulations section 1.163(j)-7(b).  
General Instructions  
For a CFC group, an additional Form  
8990 must be filed for the CFC group to  
report the combined limitations of all CFC  
group members. See Specified Group  
Parent, later.  
Purpose of Form  
Use Form 8990 to figure the amount of  
business interest expense you can deduct  
and the amount to carry forward to the  
next year. For more information, see  
Regulations sections 1.163(j)-1 through  
1.163(j)-11.  
If a safe-harbor election is made for a  
CFC group, Form 8990 does not need to  
be filed for each CFC group member, but  
Form 8990 must be filed for the CFC  
group.  
Interest expense limitations. An  
expense that has been disallowed,  
deferred, or capitalized in the current tax  
year, or which has not yet been accrued,  
is not taken into account for section 163(j)  
purposes. Section 163(j) applies after any  
basis limitation and before the operation of  
the at-risk, passive activity loss, or excess  
business loss limitations. See Regulations  
section 1.163(j)-3 for additional  
Computation of section 163(j) limita-  
tion. If section 163(j) applies to you, the  
business interest expense deduction  
allowed for the tax year is limited to the  
sum of:  
Exclusions from filing. A taxpayer is not  
required to file Form 8990 if the taxpayer  
is a small business taxpayer and does not  
have excess business interest expense  
from a partnership. A taxpayer is also not  
required to file Form 8990 if it only has  
interest expense from one or more of  
these excepted trades or businesses:  
information on interactions of section  
163(j) with other code provisions relating  
to interest expense.  
The trade or business of providing  
If a taxpayer’s deduction for business  
interest expense is limited under section  
163(j) and such taxpayer has more than  
one business activity for purposes of  
either the at-risk (section 465) or passive  
activity loss (section 469) limitation  
services as an employee,  
Carryforward of disallowed business  
interest. The amount of any business  
interest expense that is not allowed as a  
deduction under section 163(j) for the tax  
year is carried forward to the following  
year as a disallowed business interest  
expense carryforward. However, see  
Special Rules for partnership treatment of  
disallowed business interest expense,  
later.  
If a pass-through entity is not required  
provisions, then the section 163(j)  
limitation will apply to the overall business  
interest expense from all the business  
activities of the taxpayer. The proportion of  
each activity’s business interest expense  
that is disallowed is the same proportion  
to file Form 8990 because it is a small  
business taxpayer, but a partner or  
shareholder is required to file Form 8990,  
the pass-through entity is required, upon  
request by the partner or shareholder, to  
Jan 23, 2023  
Cat. No. 71420E  
as the disallowed business interest  
expense over the total business interest  
expense. See Regulations section  
1.163(j)-3(c) example 4 and Temporary  
Regulations section 1.163-8T.  
receipts, in proportion to the partner’s  
distributive share of items of gross income  
or S corporation’s shareholder’s pro rata  
share of gross receipts, unless the partner  
and partnership, or S corporation  
Aggregation Rules at IRS.gov.  
Tax shelter election. A taxpayer that is a  
tax shelter as defined in section 448(d)(3)  
is not permitted to use the small business  
exemptions contained in section 163(j)(3).  
Under section 448(d)(3), a taxpayer that is  
a “syndicate” is considered to be a tax  
shelter. To determine whether a taxpayer  
is a syndicate, the section 448 regulations  
permit a taxpayer to make an annual  
election to use its allocations of income,  
gain, loss, or deduction made in the  
immediately preceding tax year, instead of  
using its current year allocations. The  
election is made on a timely filed original  
return (including extensions) for the tax  
year for which it is made. It is only valid for  
that tax year and once made cannot be  
revoked. See Regulations section  
shareholder and S corporation, are treated  
as a single person. In that case, see Gross  
affiliated group, later.  
The gross receipts of an organization  
subject to tax under section 511 only  
include gross receipts taken into account  
in determining its unrelated business  
taxable income.  
Partner basis limitations. Deductible  
business interest expense and excess  
business interest expense are subject to  
section 704(d) loss limitation rules. See  
Regulations section 1.163(j)-6(h)(1) and  
(2).  
Definitions  
The definitions below are only for the  
purposes of applying section 163(j).  
Small business taxpayer. A small  
business taxpayer is not subject to the  
section 163(j) limitation and is generally  
not required to file Form 8990.  
A small business taxpayer is a taxpayer  
that is not a tax shelter (as defined in  
section 448(d)(3)) and meets the gross  
receipts test, described below. A tax  
shelter is defined as:  
Note. Gross receipts must meet the  
definition under section 448(c) and  
Temporary Regulations section  
1.448-1T(f)(2)(iv).  
1.448-2(b)(2)(iii)(B)(2) for guidance on the  
time and manner of making the annual  
election.  
Any reference to your business gross  
receipts also includes a reference to the  
gross receipts of any predecessor of your  
business. If your business was not in  
existence for the entire 3-year period,  
base your average annual gross receipts  
on the period your business existed. Also,  
if your business had a tax year of less than  
12 months, your gross receipts must be  
annualized by multiplying the gross  
receipts for the short period by 12 and  
dividing the result by the number of  
months in the short period.  
Excepted trade or business. A trade or  
business does not include:  
Any enterprise other than a C  
Performing services as an employee,  
corporation offering ownership via  
registered securities,  
Any syndicate within the meaning of  
section 1256(e)(3)(B) (see Regulations  
section 1.163(j)-2(d)(3)), or  
How to make an election and the effect  
Any entity described in section 6662(d)  
of being an excepted trade or business  
(2)(C)(ii).  
are discussed under Special Rules, later.  
A pass-through entity that is a small  
The prior period gross receipts must be Electing real property trade or busi-  
business taxpayer does not allocate  
excess taxable income, excess business  
interest income, or excess business  
interest to its owners.  
annualized for any short period before  
dividing by 3.  
ness. A real property trade or business  
engaged in activities described in section  
469(c)(7) may elect to not be subject to  
the section 163(j) limitation. See Elections  
under Special Rules, later, for the effect of  
making an election. Real property trade or  
business means any real property  
development, redevelopment,  
For assistance in preparing the  
average annual gross receipts, see the  
Gross receipts test. A taxpayer meets  
the gross receipts test if the taxpayer has  
average annual gross receipts of $27  
million or less for the 3 prior tax years.  
A taxpayer's average annual gross  
receipts for the 3 prior tax years is  
determined by:  
Gross receipts aggregation for  
members of a controlled group,  
construction, reconstruction, acquisition,  
conversion, rental, operation,  
businesses under common control, or  
members of an affiliated group. For  
section 163(j), gross receipts may include  
the receipts of more than one taxpayer.  
For this purpose, all members of a  
management, leasing, or brokerage trade  
or business.  
1. Adding the gross receipts for the 3  
prior tax years, and  
Electing farming business. Farming  
businesses (as defined in section 263A(e)  
(4)) and specified agricultural and  
2. Dividing the total by 3.  
controlled group of corporations (as  
defined in section 52(a)), and all members  
of a group of businesses under common  
control (as defined in section 52(b)), are  
treated as a single person; and all  
In the case of any taxpayer, which is  
not a corporation or a partnership, and  
except as provided below, the gross  
receipts test is applied in the same  
manner as if such taxpayer were a  
corporation or a partnership.  
horticultural cooperatives (as defined in  
section 199A(g)(4)) may elect to not be  
subject to the section 163(j) limitation. See  
Elections under Special Rules, later, for  
the effect of making an election. A farming  
business includes livestock, dairy, poultry,  
fish, fruit, nut, and truck farms. It also  
includes plantations, ranches, ranges, and  
orchards. A fish farm is an area where fish  
and other marine animals are grown or  
raised and artificially fed, protected, etc.,  
but it does not include an area where they  
are merely caught or harvested. A plant  
nursery is a farm for purposes of  
members of an affiliated service group (as  
defined in sections 414(m) and (o)) shall  
be treated as a single person. If you and a  
partnership or S corporation in which you  
hold an interest are treated as a single  
person for purposes of the gross receipts  
test, aggregate the partnership’s or S  
corporation’s gross receipts with your  
gross receipts. Do not duplicate amounts  
by also including a share of partnership or  
S corporation gross receipts as your own  
gross receipts.  
Gross receipts for any tax year must be  
reduced by returns and allowances made  
during the year. For individuals and for  
section 163(j) only, gross receipts do not  
include inherently personal amounts such  
as disability benefits, social security  
benefits, and wages received as an  
employee and reported on Form W-2.  
deducting soil and water conservation  
For section 163(j), a taxpayer with an  
ownership interest in a partnership or S  
corporation must include a share of the  
partnership’s or S corporation’s gross  
expenses.  
For more information, see Average  
Section 448(c), later.  
A specified agricultural or horticultural  
cooperative is a cooperative to which Part  
-2-  
         
I of subchapter T of the Internal Revenue  
Code applies that manufactures,  
produces, grows, or extracts any  
agricultural or horticultural product, or has  
marketed agricultural or horticultural  
products.  
Business interest income does not include interest, such as sections 263A and 267,  
investment income.  
as well as basis, at-risk and passive  
activity loss limitations.  
Any additions or subtractions from  
taxable income in arriving at ATI  
Interest income that is allocable to an  
excepted trade or business is not treated  
as business interest income.  
!
CAUTION  
are limited to the amount by which  
Certain regulated utility businesses.  
Certain regulated utility trades or  
the item affects taxable income.  
Business interest expense. Business  
interest expense means any interest paid  
or accrued that is properly allocable to a  
trade or business. Business interest  
expense, generally, does not include  
investment interest or other personal  
interest. See Temporary Regulations  
section 1.163-9T for a definition of  
personal interest. However, see C  
income, later.  
Applicable percentage. The applicable  
percentage is the percentage applied to  
ATI for purposes of computing the  
business interest expense limitation  
calculation. The applicable percentage is  
30% (30% ATI limitation).  
businesses are not subject to the section  
163(j) limitation. No election is required for  
certain regulated utility businesses,  
meaning these trades or businesses are  
automatically excepted from the limitation.  
Automatically excepted regulated  
utilities are trades or businesses that  
furnish or sell:  
Floor plan financing interest expense.  
Floor plan financing interest expense is  
not subject to the section 163(j) limitation.  
Floor plan financing interest expense is  
interest on debt used to finance the  
acquisition of motor vehicles held for sale  
or lease where the debt is secured by the  
acquired inventory.  
Electrical energy, water, or sewage  
disposal services;  
Gas or steam through a local  
Interest expense that is allocable to an  
excepted trade or business is not treated  
as business interest expense.  
distribution system; or  
Transportation of gas or steam by  
pipeline.  
To be an automatically excepted  
Excess business interest expense. If a  
partnership has a limitation on business  
interest expense, the disallowed business  
interest expense is not carried over by the  
partnership, but is allocated to the  
Excess taxable income. In general,  
excess taxable income is the amount of a  
partnership’s or S corporation’s ATI that is  
in excess of the amount of ATI required to  
support the partnership’s or S  
regulated utility trade or business, the  
rates for furnishing or sale of the above  
listed items must be established or  
approved by a state or political subdivision  
thereof, by any agency or instrumentality  
of the United States, by a public service or  
public utility commission or other similar  
body of any state or political subdivision  
thereof, on a rate of return and cost of  
service basis, or by the governing or  
rate-making body of an electric  
partners. This interest is referred to as  
excess business interest expense.  
corporation’s business interest expense  
deduction. This amount is computed by a  
partnership or an S corporation and is  
allocated to the partner or shareholder.  
This amount is used by the partner or  
shareholder in determining their current  
year ATI.  
Tentative taxable income Tentative  
taxable income is generally the same as  
taxable income under section 63.  
However, tentative taxable income is  
computed as if the section 163(j) limitation  
does not exist; therefore, do not include  
disallowed business interest expense  
carryforwards from a prior year or excess  
business interest expense from a prior  
year.  
cooperative.  
Excess business interest income.  
Excess business interest income is the  
amount by which current year business  
interest income exceeds current year  
business interest expense (excluding floor  
plan financing). This amount is computed  
by a partnership or an S corporation and is  
allocated to the partner or shareholder.  
This amount is used by the partner or  
shareholder in determining their current  
year business interest income.  
If the trade or business does not qualify  
as an automatically excepted regulated  
utility trade or business because its rates  
are not established or approved on a cost  
of service and rate of return basis, the  
taxpayer may be able to elect that the  
trade or business be an excepted trade or  
business. See Regulations section  
See Regulations section 1.163(j)-1(b)  
(43) for more information.  
Adjusted taxable income (ATI). ATI  
means tentative taxable income of the  
taxpayer computed without regard to:  
1.163(j)-1(b)(15)(iii)(A) regarding electing  
utility trades or businesses. Also, see  
Elections under Special Rules, later, for  
the effect of making an election.  
Any item of income, gain, deduction, or  
loss, which is not properly allocable to a  
trade or business (within the meaning of  
section 162);  
Special Rules  
Interest. In general, interest is any  
amount that is paid, received, or accrued  
as compensation for the use or  
Elections. A taxpayer engaged in a real  
property trade or business, a farming  
business, or a non-automatically excepted  
regulated utility trade or business may  
elect not to limit business interest expense  
under section 163(j) for such trade or  
business. This is an irrevocable election.  
Any business interest income or  
business interest expense;  
The amount of any net operating loss  
forbearance of money or that is treated as  
interest under the Internal Revenue Code  
or the regulations thereunder.  
deduction under section 172;  
The amount of any qualified business  
income allowed under section 199A (for  
purposes of determining ATI the section  
199A deduction is determined without  
regard to section 163(j). See Regulations  
section 1.163(j)-1(b)(43));  
Regulations section 1.163(j)-1(b)(22)  
provides additional guidance on what  
constitutes interest for purposes of section  
163(j), including anti-avoidance rules and  
a list of other amounts treated as interest,  
such as certain amounts of bond premium,  
factoring income, and section 163(j)  
interest dividends from regulated  
If the real property trade or business or  
farming business election is in effect, you  
are required to use the alternative  
depreciation system (ADS) for certain  
property. See Pub. 946, How To  
For tax years beginning before 2022,  
any deduction for depreciation,  
amortization, or depletion attributable to a  
trade or business; and  
Depreciate Property. Also, you are not  
entitled to the special depreciation  
allowance for that property. For a taxpayer  
with more than one qualifying business,  
the election is made with respect to each  
trade or business.  
investment companies.  
Adjustments described in published  
Business interest income. Business  
interest income means the amount of  
interest income includible in the taxpayer’s  
gross income for the tax year, which is  
properly allocable to a trade or business.  
guidance.  
To determine ATI, tentative taxable  
income is computed after applying other  
sections limiting the deductibility of  
-3-  
               
1.163(j)-1(b)(15)(iii) (as an electing utility  
trade or business), as applicable.  
Electing real property trade or busi-  
business must use the ADS for any  
Self-charged interest. See Regulations  
section 1.163(j)-6(n) for the treatment of  
business interest income and business  
interest expense with respect to lending  
transactions between a partnership and a  
partner.  
Consolidated group’s trade or busi-  
ness. Only the name and taxpayer  
identification number (TIN) of the agent for  
the group, as defined in Regulations  
section 1.1502-77, must be provided on  
the election statement.  
nonresidential real property, residential  
rental property, and qualified improvement  
property used in its trade or business.  
Revenue Procedure 2021-9. Revenue  
Procedure 2021-9 provides a safe harbor  
that allows a taxpayer engaged in a trade  
or business that manages or operates a  
residential living facility that provides  
certain supplemental assistive, nursing,  
and other routine medical services to treat  
such trade or business as a real property  
trade or business. See Revenue  
Partner. A partner’s excess business  
interest expense is treated as paid or  
accrued by the partner in subsequent  
years to the extent the partner is allocated  
current year excess taxable income or  
excess business interest income from the  
same partnership.  
If a partner not subject to the section  
163(j) limitation has excess business  
interest expense from a prior year and is  
allocated excess taxable income or  
excess business interest income in the  
current year, the partner would file Form  
8990 and the amount of excess business  
interest expense treated as paid or  
accrued in the current year would not be  
subject to further limitation under section  
later.  
A partner subject to the section 163(j)  
limitation will include the amount of excess  
business interest expense treated as paid  
or accrued in figuring its current year  
business interest expense limitation.  
If both a partnership and a partner are  
subject to the section 163(j) limitation, the  
partner’s current year business interest  
expense limitation computation will  
include the following amounts from each  
of its partnerships:  
Partnership’s trade or business. An  
election for a partnership must be made  
on the partnership’s return with respect to  
any trade or business that the partnership  
conducts. An election by a partnership  
does not apply to a trade or business  
conducted by a partner outside the  
partnership.  
Procedure 2021-9 for additional  
information and requirements to qualify for  
the safe harbor.  
Taxpayers with both excepted and  
non-excepted trades or businesses.  
Taxpayers must allocate and apportion  
their interest expense, interest income,  
and other tax items between excepted and  
non-excepted trades or businesses,  
applying the rules under Regulations  
section 1.163(j)-10. An asset basis  
Electing farming business. An electing  
farming business must use the ADS for  
any farming property the taxpayer owns  
with a recovery period of 10 years or  
more.  
Regulated utility trade or business.  
Automatically excepted utility trades or  
businesses and electing utility trades or  
businesses cannot claim the additional  
first-year depreciation deduction under  
section 168(k) for any property that is  
primarily used in the excepted regulated  
utility trade or business.  
approach is generally used to allocate  
interest expense and interest income.  
Regulations section 1.163(j)-10(c)  
requires a taxpayer to attach a statement  
to its timely filed tax return, providing  
information related to the asset basis and  
allocation determination, as provided, in  
Regulations section 1.163(j)-10(c)(6)(iii).  
Safe harbor for real estate investment  
trusts (REITs). Under certain  
Partnerships. If a partnership is subject  
to the section 163(j) limitation, the section  
163(j) limitation is applied at the  
circumstances, a REIT (and a partnership  
controlled by one or more REITs) is  
eligible to make an election to be a real  
property trade or business. See  
partnership level. If a partnership has  
deductible business interest expense,  
such deductible business interest expense  
is not subject to any further limitation  
under section 163(j) at the partner level.  
For all other purposes of the Code,  
however, deductible business interest  
expense retains its character as business  
interest expense at the partner level.  
Current year excess taxable income,  
Excess business interest expense  
Regulations section 1.163(j)-9(h).  
treated as paid or accrued, and  
How to make the election. To make an  
election for a real property, farming, or  
non-automatically excepted regulated  
utility trade or business, attach an election  
statement to a timely filed original tax  
return (including extensions). Once the  
election is made, it is irrevocable.  
Current year excess business interest  
income.  
These amounts will not include items  
from an excepted trade or business.  
If the partnership has a limitation on  
business interest expense, the disallowed  
business interest expense (excess  
business interest expense) is not carried  
over by the partnership, but is allocated to  
the partners.  
After completing Form 8990, the  
partnership must determine how the  
deductible business interest expense,  
excess business interest expense, excess  
taxable income, and excess business  
interest income are allocated among the  
If a partner is subject to the section  
163(j) limitation and the partnership is not,  
later.  
The statement must be titled “Section  
1.163(j)-9 Election” (for real property or  
farming businesses) or “Section  
1.163(j)-1(b)(15)(iii) Election” (for an  
electing utility trade or business), and  
must contain the following information for  
each electing trade or business:  
In the event a partner sells a  
partnership interest and the partnership in  
which the interest is being sold owns only  
non-excepted trade or business assets,  
the gain or loss on the sale of the  
partnership interest is included in the  
partner’s ATI. If the partnership interest  
consists of both excepted and  
The taxpayer’s name;  
The taxpayer’s address;  
The taxpayer’s social security number  
(SSN) or employer identification number  
(EIN);  
non-excepted assets, the partner may use  
the method set forth in Regulations  
section 1.163(j)-10(c) to determine the  
amount properly allocable to a  
A description of the taxpayer’s electing  
trade or business, sufficient to  
demonstrate qualification for an election,  
including the principal business activity  
code; and  
used to determine the amount of each  
item allocable to each partner. See  
Regulations section 1.163(j)-6(f)(2) for  
additional information on the allocation.  
non-excepted trade or business and,  
therefore, properly includible in the  
partner’s ATI.  
A statement that the taxpayer is making  
an election pursuant to section 163(j)(7)  
(B) (as an electing real property trade or  
business) or (C) (as an electing farming  
business), or Regulations section  
Excess business interest expense  
from a prior tax year that was suspen-  
ded under section 704(d) (“negative  
-4-  
 
section 163(j) expense”). See  
expenses that a partnership pays,  
activity and partners that do not materially  
participate. Only the portion of the interest  
expense that is allocable to the materially  
participating partners is subject to  
Regulations section 1.163(j)-6(h) for basis  
receives, or accrues and allocates to a C  
adjustment calculations and ordering rules corporation partner as a separately stated  
for losses under section 704(d).  
item is treated by the C corporation as  
properly allocable to a trade or business of limitation under section 163(j) at the  
Excess business interest expense in  
tiered partnerships. See 2020  
that partner. Similarly, for purposes of  
section 163(j), any other tax items of a  
partnership that are neither properly  
allocable to a trade or business of the  
partnership nor described in section  
163(d) and that are allocated to a C  
corporation partner as separately stated  
items, are treated as properly allocable to  
a trade or business of that partner. See  
Regulations section 1.163(j)-4(b)(3)(i).  
partnership level. In addition, the trading  
partnership is required to bifurcate all of its  
other items of income, gain, loss, and  
deduction from its trading activity allocable  
to the partners that do not materially  
Proposed Regulations section 1.163(j)-6(j)  
for treatment of excess business interest  
expense in tiered partnerships.  
S corporation. The section 163(j)  
limitation is applied at the S corporation  
level. Disallowed business interest  
expense is carried over by the S  
corporation and is treated as business  
interest expense paid or accrued in the  
following year.  
participate. Such items are not taken into  
account at the partnership level as items  
from a trade or business for section 163(j),  
but instead are treated as items from an  
investment activity of the partnership.  
Current year business interest expense  
is deducted before disallowed business  
interest expense carryforwards, which are  
then deducted in the order of the year in  
which they were incurred, starting with the  
earliest year, subject to certain limitations.  
Foreign persons with effectively con-  
nected income (ECI). A nonresident  
alien individual or foreign corporation that  
is not a relevant foreign corporation and  
that has ECI is also subject to the section  
163(j) limitation. As foreign persons are  
only taxed on their ECI, ATI, business  
interest expense, business interest  
For a shareholder subject to the section  
163(j) limitation, the shareholder’s current  
year section 163(j) limitation computation  
will include the following amounts from  
each of its S corporations:  
Consolidated group. A consolidated  
group has a single section 163(j)  
Current year excess taxable income,  
and  
income, and floor plan financing interest  
expense are modified to limit such  
limitation. A consolidated group files one  
Form 8990. For members entering or  
leaving the group, see Regulations section  
1.163(j)-5 for applicable limitations.  
Current year excess business interest  
income.  
amounts to income which is ECI and  
expenses properly allocable to ECI. A  
relevant foreign corporation means any  
foreign corporation whose classification is  
relevant under Regulations section  
These amounts will not include items  
from an excepted trade or business.  
Intercompany obligations. All  
intercompany obligations, as defined in  
Regulations section 1.1502-13(g)(2)(ii),  
are disregarded for purposes of  
determining a member’s business interest  
expense and business interest income  
and in figuring the consolidated group’s  
ATI.  
Ownership of pass-through entities  
not subject to the section 163(j) limita-  
tion. If you are subject to the section  
163(j) limitation and are an owner of a  
pass-through entity that is not subject to  
the section 163(j) limitation, your share of  
the pass-through business interest  
expense is not subject to the section  
163(j) limitation, and your share of  
non-excepted trade or business items of  
income, gain, loss, and deduction  
(including business interest expense and  
business interest income) of such  
301.7701-3(d)(1) for a tax year, other than  
solely pursuant to sections 881 or 882.  
Before applying section 163(j), a  
foreign corporation that has ECI must first  
determine its business interest expense  
allocable to ECI under Regulations section  
1.882-5. Business interest expense  
allocable to ECI is reported on Schedule I  
(Form 1120-F). Disallowed business  
interest expense carryforward, as  
Tax-exempt corporations with unrela-  
ted business income (UBI). The rule for  
C corporation interest expense and  
income applies to a corporation that is  
subject to the unrelated business income  
tax under section 511 only with respect to  
that corporation’s items of income, gain,  
deduction, or loss that are taken into  
account in computing the corporation’s  
unrelated business taxable income, as  
defined in section 512.  
determined under section 163(j), that was  
allocable to ECI in a prior year but  
pass-through entity, if net positive, is  
included on line 13. You must request the  
pass-through entity to separately state, in  
sufficient detail, the items necessary to  
include on line 13.  
In the event a partnership allocates  
excess business interest expense to one  
or more of its partners, and in a later tax  
year the partnership is an exempt entity,  
the excess business interest expense  
from the prior year is treated as business  
interest expense paid or accrued by the  
partner in the later year. See Regulations  
section 1.163(j)-6(m)(3).  
deductible in the current tax year and any  
current year ECI business interest  
expense that becomes disallowed  
business interest expense carryforward,  
after applying section 163(j), are also  
included on Schedule I (Form 1120-F).  
Regulated investment companies  
(RICs) and real estate investment  
trusts (REITs). For special rules for  
determining ATI for RICs and REITs, see  
Regulations section 1.163(j)-4(b)(4). For a  
safe harbor for REITs (and partnerships  
controlled by one or more REITs) making  
an election to be an electing real property  
trade or business, see Regulations section  
1.163(j)-9(h).  
Relevant foreign corporations. Section  
163(j) generally applies to determine the  
deductibility of a relevant foreign  
corporation’s business interest expense  
for purposes of computing its taxable  
income (determined under Regulations  
section 1.952-2 or the rules of section  
882) in the same manner as it applies to  
determine the deductibility of a domestic C  
corporation’s business interest expense  
for purposes of computing its taxable  
income. An applicable CFC means a  
foreign corporation described in section  
957, but only if the foreign corporation has  
at least one U.S. shareholder that owns  
(within the meaning of section 958(a))  
stock of the foreign corporation.  
C corporation business interest ex-  
pense and income. Solely for section  
163(j), all interest paid or accrued (or  
treated as paid or accrued) by a C  
Trading partnerships. A trading  
partnership is a partnership engaged in a  
trade or business activity of trading  
personal property (including marketable  
securities) for the account of owners of  
interests in the activity, as described in  
Temporary Regulations section  
corporation is business interest expense,  
and all interest includible in gross income  
by a C corporation is business interest  
income, except to the extent such interest  
expense or interest income is allocable to  
an excepted trade or business.  
1.469-1T(e)(6). A trading partnership is  
required to bifurcate its interest expense  
from a trading activity between partners  
that materially participate in the trading  
CFC group election. In order to make a  
CFC group election under Regulations  
section 1.163(j)-7(e), each designated  
Any investment interest expense,  
investment interest income, or investment  
-5-  
       
U.S. person (as defined in Regulations  
section 1.163(j)-7(k)(12)) must attach the  
election statement described in  
Form 8990 must be filed for the CFC  
group in order to report the combined  
limitation of the CFC group. The CFC  
group's Form 8990 must be filed by the  
made. See Regulations section  
1.163(j)-7(e)(5)(ii).  
Specified group parent. A specified  
group parent means a qualified U.S.  
person or an applicable CFC. A qualified  
U.S. person means a United States  
person described in section 7701(a)(30)  
(A) or (C). Members of a consolidated  
group that file (or that are required to file) a  
consolidated U.S. federal income tax  
return are treated as a single qualified  
U.S. person, and individuals described in  
section 7701(a)(30)(A) whose filing status  
is married filing jointly are treated as a  
single qualified U.S. person.  
Regulations section 1.163(j)-7(e)(5)(iv) to  
the CFC group’s Form 8990 in the year the specified group parent, if the specified  
CFC group election is made. The  
group parent is a qualified U.S. person. If  
the specified group parent is a CFC, the  
U.S. shareholders that file Form 5471 for  
the specified group parent must file the  
CFC group's Form 8990 with Form 5471  
of the specified group parent. In addition, if  
a U.S. shareholder that files Form 5471 for  
a CFC group member is not the specified  
group parent and does not file Form 5471  
for the specified group parent, the CFC  
group's Form 8990 should be attached to  
such U.S. shareholder's tax return.  
statement must include the name and  
taxpayer identification number of all  
designated U.S. persons, a statement that  
the CFC group election is being made, the  
specified period (as defined in  
Regulations section 1.163(j)-7(k)(29)) for  
which the CFC group election is being  
made, the name of each CFC group  
member, and its specified tax year with  
respect to the specified period. If a CFC  
group election was previously revoked,  
the statement must include a certification  
that the specified period for which the  
election is made did not begin before 60  
months following the last day of the  
specified period for which the election was  
revoked. See Regulations section  
1.163(j)-7(e)(5)(ii).  
Designated U.S. person. With respect  
to a specified group, a designated U.S.  
person means either the specified group  
parent (if the specified group parent is a  
qualified U.S. person) or each controlling  
domestic shareholder (see Regulations  
section 1.964-1(c)(5)(i)) of the specified  
group parent (if the specified group parent  
is an applicable CFC). With respect to a  
stand-alone applicable CFC, each  
On the CFC group's Form 8990, line 1  
through line 25 should be completed by  
adding together the individual amounts  
reported by each CFC group member on a  
separate entity basis. However, for  
purposes of determining ATI of a CFC  
group, the limitation that ATI cannot be  
less than zero applies with respect to the  
If a CFC group election is in effect, a  
single section 163(j) limitation is computed ATI of the CFC group but not the ATI of  
controlling domestic shareholder of the  
stand-alone applicable CFC is a  
for a specified period of a CFC group. A  
CFC group sums each of its CFC group  
member’s separate-company applicable  
amounts for a specified period. Items of a  
CFC group member are translated into a  
single currency (which may be the U.S.  
dollar or the functional currency of a  
plurality of the CFC group members) for  
the CFC group and back to the functional  
currency of the CFC group member using  
the average exchange rate for the CFC  
group member’s specified tax year (as  
defined in Regulations section  
any CFC group member. Line 26 through  
line 31 of Form 8990 should be completed  
by reference to the total amounts reported  
on line 1 through line 25. Each designated  
U.S. person should attach a statement  
identifying the specified group parent, the  
specified period, and the name and  
specified tax year of each CFC group  
member.  
On the CFC group’s Form 8990, enter  
“Specified Group Parent” as the name of  
the foreign entity on line A. Enter zeros for  
the foreign entity’s EIN number. Do not  
complete Schedule A or Schedule B of the  
CFC group's Form 8990.  
Compliance with these instructions  
satisfies the statement requirement under  
Regulations section 1.163(j)-7(e)(5)(iv)  
and the annual information reporting  
requirement under Regulations section  
1.163(j)-7(e)(6).  
designated U.S. person.  
Safe-harbor election. If a safe-harbor  
election is in effect with respect to a tax  
year of a stand-alone applicable CFC or a  
specified tax year of a CFC group  
member, then, for such year, no portion of  
the applicable CFC's business interest  
expense is disallowed under the section  
163(j) limitation. See instructions to  
Worksheet C, and complete Worksheet C  
before completing Part I.  
1.163(j)-7(k)(30)), using any reasonable  
method, consistently applied. Only  
If the safe-harbor election is made for a  
stand-alone applicable CFC, the U.S.  
shareholders that file Form 8990 for the  
stand-alone applicable CFC must attach  
Worksheet C to their tax return together  
with the Form 8990 of the stand-alone  
applicable CFC and complete Part I of the  
stand-alone applicable CFC's Form 8990  
in accordance with the instructions to  
Worksheet C. Check the "Yes" box on line  
D of the stand-alone applicable CFC's  
Form 8990.  
If the safe-harbor election is made for a  
CFC group, the U.S. shareholders that file  
the CFC group's Form 8990 must attach  
Worksheet C to their tax return together  
with the CFC group's Form 8990 and  
complete Part I of the CFC group's Form  
8990 in accordance with the instructions  
to Worksheet C. Check the "Yes" box on  
line D of the CFC group's Form 8990.  
non-ECI amounts are included in the CFC  
group calculation. A separate section  
163(j) calculation and Form 8990 must be  
filed for the ECI of a CFC group member, if  
any. The CFC group member’s ECI  
attributes are treated, for this purpose, as  
attributes of a separate applicable CFC.  
Revocation of CFC group election. In  
order to revoke a CFC group election,  
each designated U.S. person must attach  
the statement described in Regulations  
section 1.163(j)-7(e)(5)(iv) to the Form  
8990 that is filed by or on behalf of the  
specified group parent. The statement  
must include the name and taxpayer  
identification number of all designated  
U.S. persons, a statement that the CFC  
group election is being revoked, the name  
of the specified group parent, the  
Form 8990 for each CFC group mem-  
ber. When a CFC group election is in  
effect, the U.S. shareholders of each CFC  
group member must file Form 8990 with  
Form 5471 for each CFC group member  
on a separate entity basis (unless a  
safe-harbor election is in effect for the  
CFC group). On each CFC group  
member’s Form 8990, report the individual  
CFC group member’s amounts on line 1  
through line 25. Do not complete line 26  
through line 29 and report the CFC group  
member’s current-year business interest  
expense deduction and disallowed  
business interest expense (as determined  
under Regulations section 1.163(j)-7(c)  
(3)) on lines 30 and 31.  
specified period for which the election is  
revoked, and the name and specified tax  
year of each specified group member. The  
statement must also include a certification  
that the specified period for which the  
election is revoked did not begin before 60  
months following the last day of the  
A safe-harbor election is valid only if  
made by each designated U.S. person.  
The requirement to file the election  
statement described in Regulations  
section 1.163(j)-7(h)(5)(ii) is satisfied by  
attaching Worksheet C in compliance with  
these instructions.  
Additional Form 8990 for CFC group.  
In addition to the Form 8990 that is filed for  
each CFC group member, a separate  
specified period for which the election was  
-6-  
   
The safe-harbor election is available if  
a CFC group’s (or stand-alone applicable  
CFC’s) business interest expense is equal  
to or less than either (a) its business  
interest income or (b) 30% of the lesser of  
(i) its qualified tentative taxable income  
(QTTI) or (ii) its eligible amount. See  
Regulations section 1.163(j)-7(h)(3). A  
CFC group is not eligible for the  
inclusion of an amount by a U.S.  
Specific Instructions  
shareholder (as defined in section 951(b))  
in gross income under sections 78,  
951(a), or 951A(a) with respect to an  
applicable CFC that is properly allocable  
to a non-excepted trade or business. A  
specified deemed inclusion also includes  
any amount included in a domestic  
partnership’s gross income under sections  
951(a) or 951A(a) with respect to an  
applicable CFC to the extent such  
amounts are attributable to investment  
income of the partnership and are  
allocated to a domestic C corporation that  
is a direct (or indirect) partner and treated  
as properly allocable to a non-excepted  
trade or business of the domestic C  
corporation.  
If Form 8990 relates to an information  
return for a foreign entity (for example,  
Form 5471), provide the foreign entity  
name and appropriate identification  
number on line A.  
If the foreign entity is a CFC group  
member or if this Form 8990 is being filed  
by or on behalf of the specified group  
parent to report the combined limitation of  
the CFC group, check the "Yes" box and  
see CFC group election, earlier, for  
additional requirements when making a  
CFC group election. One of those  
additional requirements is that a separate  
Form 8990 must be completed in order to  
report the combined limitation of the CFC  
group.  
safe-harbor election if any CFC group  
member has a pre-group disallowed  
business interest expense carryforward.  
See Regulations section 1.163(j)-7(k)(19)  
for the specified period. See Regulations  
section 1.163(j)-7(h)(2). See the  
instructions for Worksheet C for additional  
information.  
The safe-harbor does not apply to  
excess business interest expense, as  
described in Regulations section  
Section 1.163(j)-7(j) of the 2020  
Proposed Regulations does, however,  
allow a U.S. shareholder to add to its  
tentative taxable income a portion of its  
1.163(j)-6(f)(2), until the tax year in which  
it is treated as paid or accrued by an  
If a safe-harbor election is being made,  
check the "Yes" box and see Safe-harbor  
Safe Harbor Election, later, for additional  
requirements when making a safe-harbor  
election and special instructions for  
completing Part I. If a safe-harbor election  
is made, Schedules A and B should not be  
completed.  
applicable CFC under Regulations section specified deemed inclusions that are  
1.163(j)-6(g)(2)(i). Excess business  
interest expense is not taken into account  
for purposes of this election until a tax  
year in which it is treated as paid or  
accrued by an applicable CFC under  
Regulations section 1.163(j)-6(g)(2)(i).  
See Regulations section 1.163(j)-7(h) for  
full election rules.  
attributable to either a stand-alone  
applicable CFC or a CFC group member,  
except to the extent attributable to an  
inclusion under section 78 with respect to  
an applicable CFC, provided the  
applicable requirements are met. That  
portion is equal to the ratio of the  
applicable CFC’s CFC excess taxable  
income over its ATI.  
Part I—Computation of  
Allowable Business  
Interest Expense  
Limitation on pre-group disallowed  
business interest expense carryfor-  
ward. The amount of the pre-group  
disallowed business interest expense  
carryforwards that may be included in any  
CFC group member’s business interest  
expense deduction for any specified tax  
year may not exceed the aggregate  
section 163(j) limitation for all specified  
periods of the CFC group, determined by  
reference only to the CFC group  
Change in ATI computation. After  
2021, ATI is computed with deductions for  
depreciation, amortization, depletion, and  
any other deduction prescribed in  
published guidance. Do not add back the  
deductions for depreciation, amortization,  
or depletion attributable to a trade or  
business after 2021.  
Complete Part I to determine your  
allowable business interest expense  
deduction.  
If you are a taxpayer that owns an  
interest in a partnership subject to the  
section 163(j) limitation, see the  
instructions for Schedule A before  
completing Part I.  
Change from being subject to section  
163(j) to being exempt from section  
163(j) under the small business ex-  
emption. A taxpayer that has disallowed  
business interest expense from a prior  
year and meets the small business  
member’s items of income, gain,  
deduction, and loss, and reduced  
If you are a taxpayer that is a  
shareholder in an S corporation subject to  
the section 163(j) limitation, see the  
instructions for Schedule B before  
completing Part I.  
(including below zero) by the CFC group  
member’s business interest expense  
(including disallowed business interest  
expense carryforwards) taken into  
exemption in the current year is no longer  
required to limit their business interest  
expense for section 163(j) purposes.  
account as a deduction by the CFC group  
member in all specified tax years in which  
the CFC group member has continuously  
been a CFC group member of the CFC  
group (cumulative section 163(j)  
If you are a regulated investment  
company that paid section 163(j) interest  
dividends and that has no business  
interest expense for the tax year, complete  
only Sections I and III.  
Similarly, a partner with excess  
business interest expense from a  
partnership is not required to limit such  
excess business interest expense under  
section 163(j) if the partnership meets the  
small business exemption in the current  
year and the partner also meets the small  
business exemption in the current year.  
pre-group carryforward limitation). See  
Regulations section 1.163(j)-7(c)(3)(iv).  
Prepare the form in U.S. dollars.  
U.S. shareholder of an applicable CFC.  
A U.S. shareholder of an applicable CFC,  
in order to arrive at ATI, must reduce its  
tentative taxable income, by, among other  
items, an amount equal to the sum of any  
specified deemed inclusions that were  
included in the computation of the  
Section I—Business  
Interest Expense (Lines 1  
Through 5)  
Line 1. Current year business interest  
expense. Enter the business interest  
interest expense or disallowed business  
interest expense carryforwards from prior  
years) that would have been deductible in  
the current year without the application of  
section 163(j).  
Change from non-excepted trade or  
business to excepted trade or busi-  
ness. If a taxpayer has disallowed  
business interest expense from a prior  
year, or excess business interest expense  
from a partnership, for which an election to  
be an excepted trade or business is made  
in the current year, then the disallowed  
business interest expense carried forward,  
or excess business interest expense, is  
still subject to the section 163(j) limitation.  
taxpayer’s tentative taxable income,  
reduced by the portion of the deduction  
allowed under section 250(a) by reason of  
the specified deemed inclusions. See  
Regulations section 1.163(j)-1(b)(1)(ii)(G).  
A specified deemed inclusion means the  
-7-  
Interest expense from an excepted  
1366), at-risk (section 465) and passive  
activity loss (section 469), and excess  
business loss (section 461(l)) limitations  
prior to inputting the tentative taxable  
income amount.  
interest expense, to the extent includable  
in tentative taxable income, that is not  
from a pass-through entity. For section  
163(j), business interest expense does not  
include interest from an excepted trade or  
business.  
trade or business should not be included.  
earlier.  
Do not include interest expense  
allocated by a trading partnership to a  
partner that does not materially  
participate. See Trading partnerships,  
earlier.  
For C corporations with an interest in a  
partnership, any investment interest  
expense allocated to the C corporation is  
treated as business interest expense of  
the C corporation from a non-excepted  
trade or business.  
The tentative taxable income of a  
partnership or S corporation shall include  
both separately and non-separately stated  
items. For a partnership, this will generally  
be the amount on Form 1065, Analysis of  
Net Income (Loss), line 1, Net income  
(loss), less guaranteed payments,  
Note. Interest expense that is allocable to  
an excepted trade or business is not  
treated as business interest expense.  
Line 9. Amount of any net operating  
loss deduction under section 172.  
Enter the amount of any net operating loss  
deduction carried forward or carried back  
to the current tax year under section 172.  
Schedule K, line 4c. If adjustments to a  
partnership's income or deductions  
resulting from section 743(b) basis  
adjustments are taken into account in  
calculating a partnership's net income  
(loss), remove the effects of those  
Line 10. Amount of any qualified busi-  
ness income deduction allowed under  
section 199A. Enter the amount of any  
qualified business income deduction  
allowed under section 199A. To determine  
ATI, the section 199A deduction on line 10  
is determined without regard to section  
163(j). See Regulations section  
Line 2. Disallowed business interest  
expense carryforwards from prior  
years. Enter the prior year disallowed  
business interest expense carryover. See  
Form 8990, line 31, for prior year amount.  
For consolidated groups with members  
joining or leaving the group, see  
Regulations section 1.163(j)-5, as  
limitations may apply.  
adjustments by adding or subtracting the  
income, gain, loss, or deduction resulting  
from the section 743(b) basis adjustments.  
For an S corporation, this will generally be  
the amount on Form 1120-S, Schedule K,  
line 18, Income/loss reconciliation.  
1.163(j)-1(b)(43).  
To compute a partnership's and  
partner's ATI, the partnership (not the  
partner) takes into account items resulting  
from adjustments to property under  
section 734(b). See Regulations section  
1.163(j)-6(d)(2). However, to compute ATI  
or items resulting from adjustments to  
property under section 743(b), the partner  
(not the partnership) takes into account  
such items.  
Line 11. Reserved for future use.  
Reserved for future use.  
Line 2 does not apply to  
Line 12. Amount of any loss or deduc-  
tion items from a pass-through entity.  
Enter any amount of loss or deduction  
items from pass-through entities  
partnerships.  
!
CAUTION  
If Form 8990 is being completed for an  
applicable CFC with a functional currency  
other than the U.S. dollar, and the amount  
reported on line 2 is different from the  
amount reported on line 31 of the prior  
year Form 8990 due to the use of different  
translation rates for translating from  
functional currency to U.S. dollars in  
different years, attach a statement  
(regardless of whether the entity is subject  
to the section 163(j) limitation).  
Line 13. Other additions. Enter the  
amount of any capital loss carryback or  
carryover.  
These adjustments are entered on  
line 13 (or line 20) of Form 8990.  
Additions (Lines 7 Through 16)  
A taxpayer subject to the section 163(j)  
limitation who has an interest in a  
pass-through entity not subject to the  
section 163(j) limitation should include  
their share of the entity’s ATI in other  
limitation, earlier.  
Add back to tentative taxable income  
certain adjustments to arrive at ATI. Do  
not include amounts that were not taken  
into account in tentative taxable income on  
earlier.  
providing the amount of the disallowed  
business interest expense carryover in  
functional currency and the translation rate  
used in the current year and the prior year.  
In the case of a CFC group member, a  
single statement may be attached to the  
CFC group's Form 8990 for all CFC group  
members in lieu of separate statements  
for each CFC group member.  
Line 7. Any item of loss or deduction  
which is not properly allocable to a  
trade or business of the taxpayer.  
Enter any item of loss or deduction that is  
not properly allocable to a trade or  
business of the taxpayer, including the  
taxpayer’s loss or deduction from any  
excepted trades or businesses. The  
amount of the addition is limited to the  
amount the additional item affected  
tentative taxable income.  
For example, a personal casualty loss  
is not allocable to a trade or business of a  
taxpayer, which would be entered on  
line 7 as a positive amount to the extent  
the casualty loss offset tentative taxable  
income.  
A C corporation should include  
investment income from a pass-through  
entity and any other tax items of a  
partnership that are neither properly  
allocable to a trade or business of the  
partnership nor described in section  
163(d) and that are allocated to a C  
corporation partner as separately stated  
items as other additions. See C  
Line 4. Floor plan financing interest  
expense. Enter the current year floor plan  
Section II—Adjusted  
Taxable Income (Lines 6  
Through 22)  
income, earlier.  
Enter all numbers as positive amounts  
unless otherwise indicated.  
For trusts and estates subject to  
section 163(j), add back the amount of any  
income distribution deduction under  
sections 651 and 661, and the deduction  
under section 642(c).  
The ATI of a beneficiary (including a  
tax-exempt beneficiary) of a trust or a  
decedent's estate is reduced by any  
income (including any distributable net  
income) received from the trust or estate  
by the beneficiary to the extent such  
income was necessary to permit a  
Tentative Taxable Income  
Line 6. Tentative taxable income. Enter  
tentative taxable income computed as  
though all of the business interest  
Do not include amounts from  
pass-through entities, which are entered  
on line 12.  
expense is otherwise allowable business  
interest expense. In figuring tentative  
taxable income, consider all other  
Line 8. Any business interest expense  
not from a pass-through entity. Add to  
tentative taxable income all business  
applicable limitations such as sections  
163(f), 267, basis (sections 704 and  
-8-  
deduction under section 163(j)(1)(B) and  
Regulations section 1.163(j)-2(b) for any  
business interest expense of the trust or  
estate that was in excess of any business  
interest income of the trust or estate.  
A U.S. shareholder of an applicable  
CFC should include the amount added to  
the U.S. shareholder's tentative taxable  
income under 2020 Proposed Regulations  
section 1.163(j)-7(j). Separately list each  
inclusion by stand-alone applicable CFC  
or CFC group member.  
Line 20. Other reductions. Include floor Section IV—163(j)  
plan financing interest expense.  
Limitation Calculations  
For tax years beginning in 2022, ATI is  
(Lines 26 Through 31)  
computed with deductions for  
depreciation, amortization, depletion, and  
Limitation on Business Interest  
Expense  
any other deduction prescribed in  
published guidance.  
Line 26. Applicable percentage of ATI  
limitation. Multiply the ATI from line 22  
by the applicable percentage. The  
applicable percentage is 30% (30% ATI  
limitation).  
For a partnership or S corporation, if  
line 26 is zero, enter -0- on lines 35 and  
40.  
If you are filing Form 8990 for an  
applicable CFC, include the amount of any  
related party dividend income. See  
Regulations section 1.163(j)-7(g)(2).  
A U.S. shareholder of an applicable  
CFC should include an amount equal to  
the sum of any specified deemed  
A relevant foreign corporation should  
include the amount of any deduction for  
foreign income tax (as defined in  
inclusions that were included in the  
computation of the taxpayer's tentative  
taxable income, reduced by the portion of  
the deduction allowed under section  
250(a) by reason of the specified deemed  
inclusions. See Regulations section  
1.163(j)-1(b)(1)(ii)(G). Separately list each  
reduction by stand-alone applicable CFC  
or CFC group member.  
Regulations section 1.960-1(b)) that was  
included in computing tentative taxable  
income on line 6 since foreign income  
taxes should not reduce ATI. See  
Allowable Interest Expense  
Line 30. Total current year business  
interest expense deduction. A taxpayer  
subject to the section 163(j) limitation will  
enter on line 30 the smaller of line 29 or  
line 5. Line 30 is the amount of current  
year business interest expense deduction  
allowed after considering the section  
163(j) limitation.  
If a partner is not subject to the section  
163(j) limitation and has partnership  
excess business interest expense treated  
as paid or accrued in the current year,  
enter the amount from Schedule A,  
line 44, column (h). The amount will not be  
subject to further limitation under section  
163(j).  
If the amount on line 29 is less than the  
amount on line 5 and business interest  
expense is reported on more than one  
location on the return (such as ordinary  
business interest expense and farming  
interest expense), then the disallowed  
business interest expense must be  
allocated to each source in proportion to  
the total amount of business interest  
expense from each source. Attach a  
schedule to Form 8990 that indicates the  
amount and line item on the tax return  
where the business interest expense is  
being deducted.  
Regulations section 1.163(j)-7(g)(3).  
Also include any other additions  
described in published guidance. If none,  
leave blank.  
Line 15. Total current year S corpora-  
tion shareholder’s excess taxable in-  
come. Enter the amount of any S  
corporation excess taxable income  
reported on Schedule B, line 46, column  
(c).  
Also include any other reductions  
described in published guidance. If none,  
leave blank.  
A C corporation should include  
investment expenses from a pass-through  
entity and other tax items of a partnership  
that are neither properly allocable to a  
trade or business of the partnership nor  
described in section 163(d) and that are  
allocated to a C corporation partner as  
separately stated items as other  
Reductions (Lines 17 Through  
21)  
Subtract from tentative taxable income  
certain adjustments to arrive at ATI. Do  
not include amounts that were not taken  
into account in tentative taxable income on  
line 6. See ATI, defined earlier.  
Line 22. Adjusted taxable income  
(ATI). If line 22 is zero or less, enter zero.  
However, CFC group members should  
follow instructions below.  
Line 17. Any item of income or gain  
which is not properly allocable to a  
trade or business of the taxpayer.  
Enter any item of income or gain, which is  
not properly allocable to a trade or  
business of the taxpayer, including the  
taxpayer’s income or gain from any  
excepted trade(s) or business(es).  
For example, gain from the sale of a  
taxpayer's personal residence would be  
entered on line 17 because it is not gain  
that is allocable to a trade or business of  
the taxpayer.  
CFC group members. If a CFC group  
member has a negative amount of ATI, the  
CFC group member should report the  
negative amount on line 22. See  
Regulations section 1.163(j)-7(c)(2)(i).  
Section III—Business  
Interest Income (Lines 23  
Through 25)  
Line 23. Current year business interest  
income. Enter the amount of business  
interest income directly paid to or accrued  
by the taxpayer. This does not include  
interest income from excepted trades or  
businesses.  
For C corporations with an interest in a  
partnership, any investment interest  
income allocated to the C corporation is  
treated as business interest income of the  
C corporation from a non-excepted trade  
or business.  
earlier.  
Carryforward  
Line 31. Disallowed business interest  
expense. Subtract line 29 from line 5. If  
zero or less, enter -0-.  
Do not include amounts from  
pass-through entities, which will be  
entered on line 19.  
Note. The amount on line 31 is used on  
the taxpayer’s next year’s Form 8990,  
line 2 (except for partnerships). If the  
taxpayer completing this form is a  
partnership, carry the amount on line 31 to  
Part II, line 32, of the current year Form  
8990.  
Line 18. Any business interest income  
not from a pass-through entity. Enter  
all business interest income, to the extent  
included in tentative taxable income on  
line 6, that is not from a pass-through  
entity (regardless of whether the entity is  
subject to the section 163(j) limitation).  
Part II—Partnership  
Pass-Through Items  
Line 19. Amount of any income or gain  
items from a pass-through entity.  
Enter the amount of any income or gain  
items from pass-through entities.  
Part II is completed by a partnership that is  
subject to section 163(j) and is required to  
file Form 8990. The partnership items are  
-9-  
allocated to the partners and are not  
carried forward by the partnership.  
business interest expense, and attach a  
statement to the Form 8990 identifying the  
partnership name and amount of negative  
163(j) expense. See Regulations section  
163(j)-6(h).  
Line 44, column (h). Total excess busi-  
ness interest expense treated as paid  
or accrued. For the partners subject to  
the section 163(j) limitation, add the  
See the Instructions for Form 1065 for  
how the partnership reports the excess  
business interest expense, excess taxable  
income, and excess business interest  
income to the partners.  
amounts entered on line 43, column (h),  
for all partnerships listed. Enter this total  
amount on Part I, line 3. For partners not  
subject to the section 163(j) limitation,  
include this amount on Part I, line 30.  
Line 43, column (d). Prior year carry-  
forward. From the prior year’s Form  
8990, enter the amount from line 43,  
column (i). Increase the prior year  
carryover by the amount of negative  
section 163(j) expense that is no longer  
suspended, or if applicable, reduce the  
prior year excess business interest  
expense by the amount of negative  
section 163(j) expense that relates to the  
prior year excess business interest  
expense. Attach a statement to the Form  
8990 identifying the partnership name and  
a description of the adjustments and the  
amounts. See Regulations section  
1.163(j)-6(h).  
earlier.  
Schedule B—Summary of  
S Corporation  
Part III—S Corporation  
Pass-Through Items  
Shareholder’s Excess  
Taxable Income and  
Excess Business Interest  
Income  
Part III is completed by an S corporation  
that is subject to the section 163(j)  
limitation. The S corporation’s excess  
taxable income and excess business  
interest income are allocated to the  
shareholders pro rata after the S  
corporation’s section 163(j) limitation is  
determined and are not carried forward by  
the S corporation.  
Any taxpayer that is required to complete  
Part I and is a shareholder in an S  
corporation that is subject to the section  
163(j) limitation must complete  
Line 43, column (h). Excess business  
interest expense treated as paid or ac-  
crued. Enter the lesser of:  
Schedule B before completing Part I.  
On line 45, enter the amount of current  
year excess taxable income in column (c)  
and current year excess business interest  
income in column (d), reported to the  
shareholder on Schedule K-1 for each S  
corporation.  
See the Instructions for Form 1120-S  
for how to report the excess taxable  
income and the excess business interest  
income to the shareholders.  
The total excess business interest  
expense amount in column (e), or  
The current year excess taxable  
income in column (f) plus the current year  
excess business interest income in  
column (g) from the same partnership.  
Schedule A—Summary of  
Partner’s Section 163(j)  
Excess Items  
Line 46, column (c). Total current year  
excess taxable income. Add the  
amounts entered on line 45, column (c),  
for all S corporations listed. Enter this total  
amount on Part I, line 15.  
In addition, add any of the applicable  
amounts listed below, and attach a  
statement to the Form 8990 identifying the  
partnership name, amount, and  
description of addition.  
Any taxpayer that is required to complete  
Part I and is a partner in a partnership that  
is subject to the section 163(j) limitation  
must complete Schedule A before  
Line 46, column (d). Total current year  
excess business interest income. Add  
the amounts entered on line 45, column  
(d), for all S corporations listed. Combine  
this total amount with Schedule A, line 44,  
column (g) and enter the total on Part I,  
line 24.  
The amount of excess business interest  
expense carryover on line 43(d) if the  
partnership became an exempt entity  
during the tax year. See Regulations  
section 1.163(j)-6(m)(3).  
completing Part I. For a foreign person  
that is not a relevant foreign corporation  
with an interest in a partnership engaged  
in a U.S. trade or business, the amount of  
excess items is limited to ECI. For such  
foreign partners, report on Schedule A  
only the ECI portion of the excess section  
163(j) amounts and attach a statement  
showing how the ECI portion of the excess  
section 163(j) amounts were determined.  
See 2020 Proposed Regulations section  
1.163(j)-8(c) for additional information.  
Any business interest expense that is  
treated in the current tax year, as paid or  
accrued under the transition rule of  
regulation for trading partnerships. See  
Regulations section 1.163(j)-6(c)(3).  
Worksheet  
A—Determination of Each  
Partner's Deductible  
Business Interest Expense  
and Section 163(j) Excess  
Items and Worksheet  
B—Determination of Each  
Partner's Relevant Section  
163(j) Items  
Line 43, column (i). Current year ex-  
cess business interest expense carry-  
forward. Columns 43(e) minus (h), less  
any excess business interest expense that  
previously reduced partner basis that you  
are required to make a basis adjustment  
to upon disposition of partnership interest.  
See Regulations section 1.163(j)-6(h)(3).  
On line 43, enter the amount of current  
year excess business interest expense in  
column (c), current year excess taxable  
income in column (f), and the current year  
excess business interest income in  
column (g), reported to the partner on  
Schedule K-1 for each partnership.  
Line 44, column (f). Total current year  
excess taxable income. If the partner is  
subject to the section 163(j) limitation, add  
the amounts entered on line 43, column  
(f), for all partnerships listed. Enter this  
total amount on Part I, line 14.  
The Regulations provide guidance  
regarding how a partnership subject to the  
section 163(j) limitation must allocate its  
deductible business interest expense and  
section 163(j) excess items, if any, among  
its partners. The Regulations provide that  
deductible business interest expense and  
section 163(j) excess items must be  
Do not include excess business  
interest expense that is suspended under  
the basis limitation rules of section 704(d).  
See Regulations section 1.163(j)-6(h) for  
basis adjustment calculations and  
ordering rules for losses under section  
704(d).  
Line 44, column (g). Total current year  
excess business interest income. For  
the partners subject to the section 163(j)  
limitation, add the amounts entered on  
line 43, column (g), for all partnerships  
listed. Combine this total amount with  
Schedule B, line 46, column (d) and enter  
the total on Part I, line 24.  
allocated in accordance with the 11-step  
computation shown in Worksheets A and  
B. See Regulations section 1.163(j)-6(f).  
The partnership should use Worksheets A  
and B in these instructions and is  
Line 43, column (c). Current year.  
Reduce the current year excess business  
interest expense by the amount of  
negative section 163(j) expense that  
relates to the current year excess  
-10-  
 
responsible for keeping records that  
compute the allocation. Partnerships that  
allocate all section 163(j) items in step 2  
proportionately do not need to use  
Worksheets A and B.  
group, the U.S. shareholders that file the  
CFC group's Form 8990 must attach  
Worksheet C to their tax return together  
with the CFC group's Form 8990 and  
complete Part I of the CFC group's Form  
8990 in accordance with these  
CFC Group election is being calculated.  
Also enter the amount from line 2 on Form  
8990, line 5.  
Line 3. Subtract line 2 from line 1. If  
the amount on line 3 is greater than or  
equal to zero, the safe-harbor requirement  
is met if all other eligibility requirements  
are met. Check “Yes” on Form 8990, line  
D. Skip lines 4 through 14, continue to  
line 15. Leave the remaining lines of Form  
8990, Part I (all lines other than line 5 and  
line 25) blank.  
Lines 1 through 7 of Worksheet A are  
taken from the partnership’s Form 8990,  
which it must complete first. Lines 8  
through 10 reflect the manner in which the  
partnership allocated its ATI, business  
interest income, and business interest  
expense to its partners. Only items that  
were taken into account in lines 1 through  
3 are taken into account in lines 8 through  
10. As a result, section 743(b)  
instructions for Worksheet C.  
Complete Worksheet C before  
completing Part I of Form 8990. Complete  
lines A through D of Form 8990 in  
accordance with the instructions  
discussed earlier in Specific Instructions  
and complete the remainder of Form 8990  
in accordance with the instructions below.  
If a safe-harbor election is made,  
Schedules A and B should not be  
completed.  
If the amount on line 3 is less than zero,  
continue to line 4.  
Line 4. Qualified tentative taxable in-  
come (QTTI). Enter the stand-alone  
applicable CFC's QTTI if a stand-alone  
election is being calculated. Enter the CFC  
group's QTTI if a CFC group election is  
being calculated. Also enter the amount  
from line 4 on Form 8990, line 6.  
adjustments, section 704(c) remedial  
allocations, allocations of investment  
income and expense, and amounts  
determined for the partner under  
A safe-harbor election may be made  
only for a stand-alone applicable CFC or  
for a CFC group. Thus, for example, it may  
not be made for an applicable CFC that is  
a specified group member if a CFC group  
election is not in effect, and it may not be  
made for any CFC group member unless it  
is made with respect to the CFC group as  
a whole.  
Regulations section 1.882-5 are not taken  
into account in lines 8 through 10. See  
Regulations section 1.163(j)-6(f)(2)(ii) for  
the definitions of “allocable ATI” (line 8),  
“allocable business interest income”  
(line 9), and “allocable business interest  
expense” (line 10). All of the information  
necessary to complete the rest of  
With respect to a stand-alone  
applicable CFC, QTTI means an  
applicable CFC's tentative taxable income  
for the tax year, determined by taking into  
account only items properly allocable to a  
non-excepted trade or business. With  
respect to a CFC group, QTTI means the  
sum of each CFC group member's  
Worksheets A and B is contained in lines  
1 through 10. See the Instructions for  
Form 1065 for how the partnership reports  
the excess business interest expense,  
excess taxable income, and excess  
business interest income to the partners.  
For purposes of the safe-harbor  
election, all items must be determined  
using the U.S. dollar. If business interest  
income, business interest expense, or any  
items that are taken into account in  
computing QTTI are maintained in a  
currency other than the U.S. dollar, then  
those items must be translated into the  
U.S. dollar using the average exchange  
rate for the tax year (or specified year, as  
applicable).  
tentative taxable income for the specified  
tax year, determined by taking into  
account only items properly allocable to a  
non-excepted trade or business. See  
Regulations section 1.163(j)-7(h)(4).  
The calculation in Regulations sections  
1.163(j)-6(f)(2)(i) through (xi) is solely for  
determining each partner’s allocable share  
of deductible business interest expense,  
excess business interest expense, excess  
taxable income, and excess business  
interest income. Accordingly, no rule set  
forth in Regulations section 1.163(j)-6(f)(2)  
prohibits a partnership from making an  
allocation to a partner that is otherwise  
permitted under section 704 and the  
regulations thereunder.  
Line 5. Thirty percent of QTTI. Multiply  
QTTI from line 4 by 30% (0.30).  
General instructions for lines 6  
Line A. Stand-alone election. Check  
the box if the election is made for a  
stand-alone applicable CFC. A  
through 9. The amounts on lines 6  
through 9 are determined based on the  
amounts that would be included and  
deducted by a hypothetical domestic  
corporation if the domestic corporation  
had a tax year ending on the last date of  
the tax year of the stand-alone applicable  
CFC (or specified period of the CFC  
group), it wholly owned the stand-alone  
applicable CFC throughout the CFC's tax  
year (or wholly owned each CFC group  
member throughout the CFC group  
member's specified tax year), it did not  
own any assets other than stock in the  
stand-alone applicable CFC (or CFC  
group members), and it had no other items  
of income, gain, deduction, or loss.  
Additionally, the amounts on lines 6  
through 9 are determined by taking into  
account any elections that are made with  
respect to the applicable CFC(s),  
stand-alone applicable CFC is an  
applicable CFC that is not a specified  
group member and therefore not eligible  
to be a CFC group member.  
Line B. CFC group election. Check the  
box if the election is made for a CFC  
group.  
Worksheet  
C—Stand-Alone  
Applicable CFC/CFC  
Group Safe Harbor  
Election  
Line C. If a CFC group election has been  
made, for the specified period, does any  
CFC group member have any pre-group  
disallowed business interest expense  
carryforward? If yes, the CFC group is not  
eligible for the safe-harbor.  
Worksheet C is used to determine  
eligibility for the safe-harbor election under  
Regulations section 1.163(j)-7(h). Fill out  
Section 1 to indicate the type of election.  
Sections 2, 3, 4, and 5 determine  
Line 1. Business interest income.  
Enter the stand-alone applicable CFC's  
business interest income if a stand-alone  
election is being calculated. Enter the CFC  
group's business interest income if a CFC  
Group election is being calculated. Also  
enter the amount from line 1 on Form  
8990, line 25.  
eligibility. If the safe-harbor election is  
made for a stand-alone applicable CFC,  
the U.S. shareholders that file Form 8990  
for the stand-alone applicable CFC must  
attach Worksheet C to their tax returns  
together with the Form 8990 of the  
including under Regulations section  
1.954-1(d)(5) (relating to the subpart F  
high-tax exception) and Regulations  
section 1.951A-2(c)(7)(viii) (relating to the  
GILTI high-tax exclusion). These amounts  
are also determined without regard to any  
section 163(j) limitation on business  
interest expense and without regard to any  
disallowed business interest expense  
stand-alone applicable CFC and complete  
Part I of the stand-alone applicable CFC's  
Form 8990 in accordance with these  
instructions for Worksheet C. If the  
Line 2. Business interest expense.  
Enter the stand-alone applicable CFC's  
business interest expense if a stand-alone  
election is being calculated. Enter the CFC  
group's business interest expense if a  
safe-harbor election is made for a CFC  
-11-  
carryovers. In addition, those amounts are  
determined by only taking into account  
items of the applicable CFC(s) that are  
properly allocable to a non-excepted trade  
or business under Regulations section  
1.163(j)-10. See Regulations section  
1.163(j)-7(h)(3).  
allowed for the hypothetical domestic  
corporation under section 245A (by  
reason of section 964(e)(4)).  
lines other than lines 5, 6, 22, and 25)  
blank.  
If the amount on line 14 is less than  
zero, the safe-harbor eligibility  
requirements are not met.  
Line 10. Total eligible amount.  
Combine lines 6 through 9. Enter the  
amount on Form 8990, line 22.  
Line 15. Name(s) of all designated U.S.  
persons. Enter the name(s) of all  
designated U.S. persons. Attach an  
additional statement if necessary.  
Line 11. Thirty percent of eligible  
amount. Multiply the eligible amount  
(line 10) by 30% (0.30).  
Line 6. Section 951(a)(1)(A) amount.  
Include on line 6 amounts that would be  
includable by the hypothetical domestic  
corporation under section 951(a)(1)(A).  
Line 16. Taxpayer identification num-  
ber(s) of line 15. Enter the taxpayer  
identification number(s) for all persons  
listed on line 15. Attach an additional  
statement if necessary.  
Line 12. Enter the lesser of line 5 or  
line 11.  
Line 7. Section 951A(a) amount.  
Include on line 7 amounts that would be  
includable by the hypothetical domestic  
corporation under section 951A(a).  
Line 13. Business interest expense.  
Enter the amount from line 2.  
Line 14. Subtract line 13 from line 12.  
If the amount on line 14 is greater than or  
equal to zero, the safe-harbor requirement  
is met if all other eligibility requirements  
are met. Check “Yes” box on Form 8990,  
line D, and continue to line 15. Leave the  
remaining lines of Form 8990, Part I (all  
Line 17. Tax year or specified period  
(as applicable). Enter the stand-alone  
applicable CFC's tax year or the CFC  
group's specified period to which the  
election relates.  
Line 8. Section 250 amount. Include on  
line 8 any deduction that would be allowed  
for the hypothetical domestic corporation  
under section 250(a)(1)(B)(i).  
Line 9. Section 245A amount. Include  
on line 9 any deduction that would be  
Average Annual Gross Receipts Worksheet Per Section 448(c)  
Column A  
Column B  
Column C  
1st preceding tax year  
2nd preceding tax year  
3rd preceding tax year  
1. Annual gross receipts  
2. Plus annual gross receipts of related entities per aggregate rules  
$
$
$
$
$
$
3. Total annual gross receipts  
$
$
$
4. Average annual gross receipts (line 3 columns A + B + C divided by  
3)  
$
-12-  
 
Determination of Each Partner’s Deductible Business Interest Expense  
and Section 163(j) Excess Items—Worksheet A  
Keep for Your Records  
Complete Form 8990 before beginning this worksheet.  
Before you begin:  
This worksheet provides space for up to three partners. If there are more than three partners, use more than  
one worksheet. The total column should reconcile to amounts for all partners.  
Partner 1  
Step 1: Partnershiplevel calculation required by section 163(j)(4)(A).  
1. Partnership’s Adjusted Taxable Income (ATI) (Form 8990, line 22)  
2. Partnership’s business interest income (Form 8990, line 25)  
3. Partnership’s business interest expense (Form 8990, subtract  
line 4 from line 5)  
4. Partnership’s deductible business interest expense (Form 8990,  
subtract line 4 from line 30) .  
5. Partnership’s excess business interest expense (Form 8990, line 32)  
6. Partnership’s excess taxable income (Form 8990, line 36)  
Partner 2  
Partner 3  
Total  
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7. Partnership’s excess business interest income (Form 8990, line 37)  
Step 2: Determine each partner’s section 163(j) items.  
8. Partner’s allocable ATI. See instructions .  
.
.
.
.
.
.
9. Partner’s allocable business interest income. See instructions  
10. Partner’s allocable business interest expense. See instructions  
Step 3: Partnerlevel comparison of business interest income and business interest expense.  
11. Subtract line 10 from line 9. (If zero or less, enter 0.) .  
12. Subtract line 9 from line 10. (If zero or less, enter 0.) .  
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Step 4: Matching partnership and aggregate partner excess business interest income.  
13. Divide line 11 by the line 11 total column amount. (If the total  
column equals zero, enter 0.)  
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14. Multiply line 13 by the line 12 total column amount .  
15. Subtract line 14 from line 11. (If zero or less, enter 0.)  
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Step 5: Remaining business interest expense determination.  
16. Divide line 12 by the line 12 total column amount. (If the total  
column equals zero, enter 0.)  
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17. Multiply line 16 by the line 11 total column amount .  
18. Subtract line 17 from line 12. (If zero or less, enter 0.)  
Step 6: Determination of final allocable ATI.  
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19. If line 8 is greater than or equal to $0, enter the amount from  
line 8. Otherwise, enter 0.  
20. If line 8 is less than $0, enter the absolute value of line 8.  
Otherwise, enter 0.  
21. Divide line 19 by the line 19 total column amount. (If the total  
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column equals zero, enter 0.)  
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22. Multiply line 21 by the line 20 total column amount .  
23. Subtract line 22 from line 19. (If zero or less, enter 0.)  
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Step 7: Partnerlevel comparison of the applicable percentage of ATI and remaining business interest expense.  
24. Multiply line 23 by the applicable percentage (deꢀned earlier)  
25. Subtract line 18 from line 24. (If zero or less, enter 0.)  
26. Subtract line 24 from line 18. (If zero or less, enter 0.)  
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-13-  
 
Determination of Each Partner’s Deductible Business Interest Expense  
and Section 163(j) Excess Items—Worksheet A—Continued  
Keep for Your Records  
Partner 1  
Step 8: Partner priority right to ATI capacity excess determination.  
Partner 2  
Partner 3  
Total  
Yes  
Yes  
Yes  
Yes  
No  
No  
No  
No  
27a. Is the line 5 total column amount greater than zero?  
27b. Is the line 20 total column amount greater than zero?  
27c. Is the line 26 total column amount greater than zero?  
27d. Are lines 27(a), 27(b), and 27(c) all “Yes”?  
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28. If line 27d is “No,” enter the amount from line 25. Otherwise,  
complete Worksheet B .  
29. If line 27d is “No,” enter the amount from line 26. Otherwise,  
complete Worksheet B .  
30. If line 27d is “No,” enter -0-. Otherwise, complete Worksheet B  
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Step 9: Matching partnership and aggregate partner excess taxable income.  
31. Divide line 28 by the line 28 total column amount. (If the total  
column equals zero, enter -0-.)  
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32. Multiply line 31 by the line 29 total column amount .  
33. Subtract line 32 from line 28. (If zero or less, enter -0-.)  
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Step 10: Match partnership and aggregate partner excess business interest expense.  
34. Divide line 29 by the line 29 total column amount. (If the total  
column equals zero, enter -0-.)  
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35. Multiply line 34 by the line 28 total column amount .  
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36. If line 30 is greater than zero, enter the amount from line 30.  
Otherwise, subtract line 35 from line 29. (If zero or less, enter -0-.)  
Step 11: Final section 163(j) excess item and deductible business interest expense allocation.  
37. Partner’s deductible business interest expense. Subtract line  
36 from line 10  
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38. Partner’s excess business interest expense. Enter the amount  
from line 36  
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39. Partner’s excess taxable income. Multiply line 33 by (10/3)  
40. Partner’s excess business interest income. Enter the amount  
from line 15  
Note.  
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• Line 3: Equals the partnership’s business interest expense, not taking into account ꢀoor plan ꢁnancing interest expense. From Form 8990,  
subtract line 4 from line 5.  
• Line 4: Equals the partnership’s deductible business interest expense, not taking into account ꢀoor plan ꢁnancing interest expense. From  
Form 8990, subtract line 4 from line 30.  
• Line 8: Equals “allocable ATI” as deꢁned in Proposed Regulations section 1.163(j)6(f)(2)(ii).  
• Line 9: Equals “allocable business interest income” as deꢁned in Proposed Regulations section 1.163(j)6(f)(2)(ii). The line 9 total column  
amount must equal the line 2 total column amount.  
• Line 10: Equals “allocable interest expense” as deꢁned in Proposed Regulations section 1.163(j)6(f)(2)(ii). The line 10 total column amount  
must equal the line 3 total column amount.  
• Line 23: The line 23 total column amount must equal the line 1 total column amount.  
• Line 27d: If line 27d is “Yes,” the partnership must complete Worksheet B (in order to get the correct values for lines 28–30) before proceeding  
to line 31 of Worksheet A.  
• Line 37: The line 37 total column amount must equal the line 4 total column amount.  
• Line 38: The line 38 total column amount must equal the line 5 total column amount.  
• Line 39: The line 39 total column amount must equal the line 6 total column amount.  
• Line 40: The line 40 total column amount must equal the line 7 total column amount.  
• The lines 13, 16, 21, 31, and 34 total column amount must equal 100% or zero.  
-14-  
Determination of Each Partner’s Relevant  
Section 163(j) Items—Worksheet B  
Keep for Your Records  
Before you begin: Complete “Determination of Each Partner’s Deductible Business Interest Expense and Section 163(j)  
Excess Items—Worksheet A” before beginning this worksheet.  
This worksheet provides space for up to three partners. If there are more than three partners, use more than  
one worksheet. The total column should reconcile to amounts for all partners.  
Step 8A: Who must complete this worksheet.  
1. If the answer to line 27(d) of Worksheet A is “Yes,” complete  
this worksheet.  
Partner 1  
Partner 2  
Partner 3  
Total  
Step 8B: Determine whether to perform Step 8C or Step 8D.  
2. Subtract line 23 of Worksheet A from line 19 of Worksheet A .  
3. Multiply line 2 of Worksheet B by the applicable percentage .  
4. If line 26 of Worksheet A is greater than zero, enter the amount  
from line 3 of Worksheet B. Otherwise, enter -0-  
5. Enter the smaller of line 4 of Worksheet B or line 26 of  
Worksheet A .  
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6. If the line 25 total column amount of Worksheet A is greater  
than or equal to the line 5 total column amount of Worksheet  
B, complete Step 8C of Worksheet B. If the line 5 total column  
amount of Worksheet B is greater than the line 25 total column  
amount of Worksheet A, complete Step 8D of Worksheet B.  
Step 8C: Calculate lines 28, 29, and 30 of Worksheet A. Return to and complete Worksheet A after Step 8C.  
7. Divide line 25 of Worksheet A by the line 25 total column  
amount of Worksheet A. (If the line 25 total column amount of  
Worksheet A equals zero, enter -0-.) .  
8. Multiply line 7 of Worksheet B by the line 5 total column  
amount of Worksheet B  
9. Subtract line 8 of Worksheet B from line 25 of Worksheet A.  
Enter the amount(s) on line 28 of Worksheet A  
10. Subtract line 5 of Worksheet B from line 26 of Worksheet A.  
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Enter the amount(s) on line 29 of Worksheet A  
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11. Enter 0on line 30 of Worksheet A.  
Step 8D: Calculate lines 28, 29, and 30 of Worksheet A. Return to and complete Worksheet A after Step 8D.  
12. Divide line 4 of Worksheet B by the line 4 total column amount  
of Worksheet B. (If the line  
Worksheet B equals zero, enter -0-.) .  
13. Multiply line 12 of Worksheet B by the line 25 total column  
amount of Worksheet A  
14. If line 4 of Worksheet B is greater than zero, enter the amount  
from line 26 of Worksheet A. Otherwise, enter -0-  
4
total column amount of  
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15. Subtract line 14 of Worksheet B from line 13 of Worksheet B.  
(If zero or less, enter -0-.) Enter the amount(s) on line 28 of  
Worksheet A .  
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16. Subtract line 13 of Worksheet B from line 14 of Worksheet B.  
(If zero or less, enter -0-.) Enter the amount(s) on line 29 of  
Worksheet A .  
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17. If line 4 of Worksheet B equals zero, enter the amount from  
line 26 of Worksheet A. Otherwise, enter -0-. Enter the  
amount(s) on line 30 of Worksheet A .  
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-15-  
 
Stand-Alone Applicable CFC/CFC Group Safe Harbor Election  
Section 163(j) Items—Worksheet C  
Attach to Your Return  
Name of foreign entity  
Employer identiꢀcation number, if any  
Reference ID number  
Section 1—Type of Safe-Harbor Election  
A. Stand-alone election  
B. CFC group election  
C. If CFC group election has been made, for the speciꢀed period, does any CFC group member have any pre-group disallowed  
business interest expense carryforward? Yes No  
If “Yes,” STOP; the CFC group is not eligible for safe-harbor.  
Section 2—Business Interest Income Safe-Harbor Calculation  
1
2
3
Business interest income  
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1
2
Business interest expense .  
Subtract line 2 from line 1. See instructions  
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3
5
Section 3—Qualified Tentative Taxable Income Calculation  
4
5
Qualiꢀed tentative taxable income  
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4
Multiply qualiꢀed tentative taxable income (line 4) by the applicable percentage. See instructions  
Section 4—Eligible Amount Calculation  
6
7
8
9
Section 951(a)(1)(A) amount  
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6
7
Section 951A(a) amount  
Section 250 amount .  
Section 245A amount  
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8
(
(
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9
)
10 Total eligible amount. Combine lines 6 through 9  
10  
11 Multiply eligible amount (line 10) by the applicable percentage. See instructions  
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11  
Section 5—Safe-Harbor Calculation  
12 Enter the lesser of line 5 or line 11  
13 Business interest expense .  
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12  
13  
14  
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14 Subtract line 13 from line 12. See instructions  
Section 6—Name and Taxpayer Identification Number of All Designated U.S. Persons  
15 Name(s) of all designated U.S. persons  
16 Taxpayer identiꢀcation number(s) of persons on line 15  
17 Taxable year or speciꢀed period (as applicable)  
-16-  
 
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estimates shown in the instructions for  
their business income tax return.  
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the information. We need it to ensure that  
you are complying with these laws and to  
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If you have comments concerning the  
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The time needed to complete and file  
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-17-