Instructions for Form 8990 (Rev. December 2022)

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Instructions for Form 8990

(Rev. December 2022)

Limitation on Business Interest Expense Under Section 163(j)

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue

Code unless otherwise noted.

Future Developments

For the latest information about

developments related to Form 8990 and

its instructions, such as legislation

enacted after they were published, go to

IRS.gov/Form8990.

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.

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

C—Stand-Alone Applicable CFC/CFC

Group Safe Harbor Election, later.

General Instructions

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.

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:

1. Business interest income,

2. Applicable percentage of the

adjusted taxable income (ATI), and

3. Floor plan financing interest

expense.

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.

Who Must File

A taxpayer (including, for example, an

individual, corporation, partnership, S

corporation) with business interest

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.

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.

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.

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).

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.

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.

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:

•

The trade or business of providing

services as an employee,

•

An electing real property trade or

business,

•

An electing farming business, or

•

Certain regulated utility businesses.

If a pass-through entity is not required

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

provide certain information so that the

partner or shareholder can complete their

return. See Ownership of pass-through

entities not subject to the section 163(j)

limitation, later.

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

Taxpayers with both excepted and

non-excepted trades or businesses, later,

for allocating interest expense between

excepted and non-excepted trades or

businesses before computing the section

163(j) limitation.

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

information on interactions of section

163(j) with other code provisions relating

to interest expense.

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

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

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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.

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:

•

Any enterprise other than a C

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

•

Any entity described in section 6662(d)

(2)(C)(ii).

A pass-through entity that is a small

business taxpayer does not allocate

excess taxable income, excess business

interest income, or excess business

interest to its owners.

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:

1. Adding the gross receipts for the 3

prior tax years, and

2. Dividing the total by 3.

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.

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.

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

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

shareholder and S corporation, are treated

as a single person. In that case, see

Gross

receipts aggregation for members of a

controlled group, businesses under

common control, or members of an

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.

Note. Gross receipts must meet the

definition under section 448(c) and

Temporary Regulations section

1.448-1T(f)(2)(iv).

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.

The prior period gross receipts must be

annualized for any short period before

dividing by 3.

For assistance in preparing the

average annual gross receipts, see the

Average Annual Gross Receipts

Worksheet Per Section 448(c), later.

Gross receipts aggregation for

members of a controlled group,

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

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

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.

For more information, see Average

Annual Gross Receipts Worksheet Per

Section 448(c), later.

Also see

FAQs Regarding the

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

1.448-2(b)(2)(iii)(B)(2) for guidance on the

time and manner of making the annual

election.

Excepted trade or business. A trade or

business does not include:

•

Performing services as an employee,

•

An electing real property trade or

business,

•

An electing farming business, or

•

Certain regulated utility businesses.

How to make an election and the effect

of being an excepted trade or business

are discussed under Special Rules, later.

Electing real property trade or busi-

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,

construction, reconstruction, acquisition,

conversion, rental, operation,

management, leasing, or brokerage trade

or business.

Electing farming business. Farming

businesses (as defined in section 263A(e)

(4)) and specified agricultural and

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

deducting soil and water conservation

expenses.

A specified agricultural or horticultural

cooperative is a cooperative to which Part

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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.

Certain regulated utility businesses.

Certain regulated utility trades or

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:

•

Electrical energy, water, or sewage

disposal services;

•

Gas or steam through a local

distribution system; or

•

Transportation of gas or steam by

pipeline.

To be an automatically excepted

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

cooperative.

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

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.

Interest. In general, interest is any

amount that is paid, received, or accrued

as compensation for the use or

forbearance of money or that is treated as

interest under the Internal Revenue Code

or the regulations thereunder.

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

investment companies.

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.

Business interest income does not include

investment income.

See C corporation business interest

expense and income, later.

Interest income that is allocable to an

excepted trade or business is not treated

as business interest 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

corporation business interest expense and

income, later.

Interest expense that is allocable to an

excepted trade or business is not treated

as business interest expense.

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

partners. This interest is referred to as

excess business interest expense.

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.

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:

•

Any item of income, gain, deduction, or

loss, which is not properly allocable to a

trade or business (within the meaning of

section 162);

•

Any business interest income or

business interest expense;

•

The amount of any net operating loss

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));

•

For tax years beginning before 2022,

any deduction for depreciation,

amortization, or depletion attributable to a

trade or business; and

•

Adjustments described in published

guidance.

To determine ATI, tentative taxable

income is computed after applying other

sections limiting the deductibility of

interest, such as sections 263A and 267,

as well as basis, at-risk and passive

activity loss limitations.

Any additions or subtractions from

taxable income in arriving at ATI

are limited to the amount by which

the item affects taxable income.

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).

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.

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

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.

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.

Special Rules

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.

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

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.

CAUTION

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Electing real property trade or busi-

ness. An electing real property trade or

business must use the ADS for any

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

Procedure 2021-9 for additional

information and requirements to qualify for

the safe harbor.

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.

Safe harbor for real estate investment

trusts (REITs). Under certain

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

Regulations section 1.163(j)-9(h).

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.

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:

•

The taxpayer’s name;

•

The taxpayer’s address;

•

The taxpayer’s social security number

(SSN) or employer identification number

(EIN);

•

A description of the taxpayer’s electing

trade or business, sufficient to

demonstrate qualification for an election,

including the principal business activity

code; and

•

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

1.163(j)-1(b)(15)(iii) (as an electing utility

trade or business), as applicable.

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.

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.

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

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).

Partnerships. If a partnership is subject

to the section 163(j) limitation, the section

163(j) limitation is applied at the

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.

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

partners.

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 are to be

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.

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.

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

163(j). See

Schedule A, Summary of

Partner’s Section 163(j) Excess Items,

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:

•

Current year excess taxable income,

•

Excess business interest expense

treated as paid or accrued, and

•

Current year excess business interest

income.

These amounts will not include items

from an excepted trade or business.

If a partner is subject to the section

163(j) limitation and the partnership is not,

see Ownership of pass-through entities

not subject to the section 163(j) limitation,

later.

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

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

non-excepted trade or business and,

therefore, properly includible in the

partner’s ATI.

Excess business interest expense

from a prior tax year that was suspen-

ded under section 704(d) (“negative

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section 163(j) expense”). See

Regulations section 1.163(j)-6(h) for basis

adjustment calculations and ordering rules

for losses under section 704(d).

Excess business interest expense in

tiered partnerships. See 2020

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.

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:

•

Current year excess taxable income,

and

•

Current year excess business interest

income.

These amounts will not include items

from an excepted trade or business.

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

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).

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

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.

Any investment interest expense,

investment interest income, or investment

expenses that a partnership pays,

receives, or accrues and allocates to a C

corporation partner as a separately stated

item is treated by the C corporation as

properly allocable to a trade or business of

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).

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.

Consolidated group. A consolidated

group has a single section 163(j)

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.

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.

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.

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).

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

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

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

limitation under section 163(j) at the

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

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.

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

income, and floor plan financing interest

expense are modified to limit such

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

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

determined under section 163(j), that was

allocable to ECI in a prior year but

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).

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.

CFC group election. In order to make a

CFC group election under Regulations

section 1.163(j)-7(e), each designated

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U.S. person (as defined in Regulations

section 1.163(j)-7(k)(12)) must attach the

election statement described in

Regulations section 1.163(j)-7(e)(5)(iv) to

the CFC group’s Form 8990 in the year the

CFC group election is made. 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 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).

If a CFC group election is in effect, a

single section 163(j) limitation is computed

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

1.163(j)-7(k)(30)), using any reasonable

method, consistently applied. Only

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.

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.

Additional Form 8990 for CFC group.

In addition to the Form 8990 that is filed for

each CFC group member, a separate

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

specified group parent, if the specified

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.

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

ATI of the CFC group but not the ATI of

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).

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

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

specified period for which the election was

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.

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

controlling domestic shareholder of the

stand-alone applicable CFC is a

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.

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.

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.

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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

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

1.163(j)-6(f)(2), until the 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). 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.

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

member’s items of income, gain,

deduction, and loss, and reduced

(including below zero) by the CFC group

member’s business interest expense

(including disallowed business interest

expense carryforwards) taken into

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)

pre-group carryforward limitation). See

Regulations section 1.163(j)-7(c)(3)(iv).

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

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

inclusion of an amount by a U.S.

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.

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

specified deemed inclusions that are

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.

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.

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

exemption in the current year is no longer

required to limit their business interest

expense for section 163(j) purposes.

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.

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.

Specific Instructions

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.

If a safe-harbor election is being made,

check the "Yes" box and see Safe-harbor

election, earlier, and Worksheet C,

Stand-Alone Applicable CFC/CFC Group

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.

Part I—Computation of

Allowable Business

Interest Expense

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.

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.

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.

Prepare the form in U.S. dollars.

Section I—Business

Interest Expense (Lines 1

Through 5)

Line 1. Current year business interest

expense. Enter the business interest

expense (not including floor plan financing

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).

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Interest expense from an excepted

trade or business should not be included.

See Ownership of pass-through entities

not subject to the section 163(j) limitation,

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.

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.

Line 2 does not apply to

partnerships.

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

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 4. Floor plan financing interest

expense. Enter the current year floor plan

financing interest expense.

Section II—Adjusted

Taxable Income (Lines 6

Through 22)

Enter all numbers as positive amounts

unless otherwise indicated.

Tentative Taxable Income

Line 6. Tentative taxable income. Enter

tentative taxable income computed as

though all of the business interest

expense is otherwise allowable business

interest expense. In figuring tentative

taxable income, consider all other

applicable limitations such as sections

163(f), 267, basis (sections 704 and

CAUTION

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.

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,

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

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.

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.

These adjustments are entered on

line 13 (or line 20) of Form 8990.

Additions (Lines 7 Through 16)

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

line 6. See

Adjusted taxable income (ATI),

earlier.

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.

Do not include amounts from

pass-through entities, which are entered

on line 12.

Line 8. Any business interest expense

not from a pass-through entity. Add to

tentative taxable income all business

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.

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.

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

1.163(j)-1(b)(43).

Line 11. Reserved for future use.

Reserved for future use.

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

(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.

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

additions. See

Ownership of pass-through

entities not subject to the section 163(j)

limitation, earlier.

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

corporation business interest expense and

income, earlier.

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

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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.

A relevant foreign corporation should

include the amount of any deduction for

foreign income tax (as defined in

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

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).

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 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.

Do not include amounts from

pass-through entities, which will be

entered on line 19.

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).

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.

Line 20. Other reductions.

Include floor

plan financing interest expense.

For tax years beginning in 2022, ATI is

computed with deductions for

depreciation, amortization, depletion, and

any other deduction prescribed in

published guidance.

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

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.

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. See

C corporation business

interest expense and income, earlier.

Line 22. Adjusted taxable income

(ATI). If line 22 is zero or less, enter zero.

However, CFC group members should

follow instructions below.

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.

See Ownership of pass-through entities

not subject to the section 163(j) limitation,

earlier.

Section IV—163(j)

Limitation Calculations

(Lines 26 Through 31)

Limitation on Business Interest

Expense

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.

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.

Carryforward

Line 31. Disallowed business interest

expense. Subtract line 29 from line 5. If

zero or less, enter -0-.

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.

Part II—Partnership

Pass-Through Items

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

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allocated to the partners and are not

carried forward by the partnership.

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.

See Ownership of pass-through entities

not subject to the section 163(j) limitation,

earlier.

Part III—S Corporation

Pass-Through Items

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.

See the Instructions for Form 1120-S

for how to report the excess taxable

income and the excess business interest

income to the shareholders.

Schedule A—Summary of

Partner’s Section 163(j)

Excess Items

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

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.

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.

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 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

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 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).

Line 43, column (h). Excess business

interest expense treated as paid or ac-

crued. Enter the lesser of:

•

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.

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.

•

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).

•

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).

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).

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.

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.

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

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.

Schedule B—Summary of

S Corporation

Shareholder’s Excess

Taxable Income and

Excess Business Interest

Income

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

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.

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.

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.

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

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

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

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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.

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)

adjustments, section 704(c) remedial

allocations, allocations of investment

income and expense, and amounts

determined for the partner under

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

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.

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.

Worksheet

C—Stand-Alone

Applicable CFC/CFC

Group Safe Harbor

Election

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

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

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

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 these

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.

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.

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).

Line A. Stand-alone election. Check

the box if the election is made for a

stand-alone applicable CFC. A

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.

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.

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.

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

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.

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.

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

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).

Line 5. Thirty percent of QTTI. Multiply

QTTI from line 4 by 30% (0.30).

General instructions for lines 6

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),

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

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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).

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 7. Section 951A(a) amount.

Include on line 7 amounts that would be

includable by the hypothetical domestic

corporation under section 951A(a).

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

allowed for the hypothetical domestic

corporation under section 245A (by

reason of section 964(e)(4)).

Line 10. Total eligible amount.

Combine lines 6 through 9. Enter the

amount on Form 8990, line 22.

Line 11. Thirty percent of eligible

amount. Multiply the eligible amount

(line 10) by 30% (0.30).

Line 12. Enter the lesser of line 5 or

line 11.

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

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 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 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 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.

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

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Determination of Each Partner’s Deductible Business Interest Expense

and Section 163(j) Excess Items—Worksheet A

Keep for Your Records

Before you begin:

✓ Complete Form 8990 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.

Partner 1 Partner 2 Partner 3 Total

Step 1: Partnership‐level calculation required by section 163(j)(4)(A).

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) . . . . . . . . . . . . .

Partnership’s deductible business interest expense (Form 8990,

subtract line 4 from line 30) . . . . . . . . . . .

Partnership’s excess business interest expense (Form 8990, line 32)

6. Partnership’s excess taxable income (Form 8990, line 36) .

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: Partner‐level 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‐.) . . .

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‐.) . . . . . . . . .

% % % %

14. Multiply line 13 by the line 12 total column amount . . . .

15. Subtract line 14 from line 11. (If zero or less, enter ‐0‐.) . .

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‐.) . . . . . . . . .

% % % %

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.

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

column equals zero, enter ‐0‐.) . . . . . . . . .

% % % %

22. Multiply line 21 by the line 20 total column amount . . . .

23. Subtract line 22 from line 19. (If zero or less, enter ‐0‐.) . .

Step 7: Partner‐level comparison of the applicable percentage of ATI and remaining business interest expense.

24. Multiply line 23 by the applicable percentage (dened 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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Determination of Each Partner’s Deductible Business Interest Expense

and Section 163(j) Excess Items—Worksheet A—Continued

Keep for Your Records

Partner 1 Partner 2 Partner 3 Total

Step 8: Partner priority right to ATI capacity excess determination.

27a.

Is the line 5 total column amount greater than zero?

Yes No

27b.

Is the line 20 total column amount greater than zero?

Yes No

27c.

Is the line 26 total column amount greater than zero?

Yes No

27d. Are lines 27(a), 27(b), and 27(c) all “Yes”? .

Yes No

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

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-.) . . . . . . . . .

% % % %

32. Multiply line 31 by the line 29 total column amount . . . .

33. Subtract line 32 from line 28. (If zero or less, enter -0-.) . .

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-.) . . . . . . . . .

% % % %

35. Multiply line 34 by the line 28 total column amount . . . .

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 . . . . . . . . . . . . . .

38. Partner’s excess business interest expense. Enter the amount

from line 36 . . . . . . . . . . . . . . .

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.

• 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 dened in Proposed Regulations section 1.163(j)‐6(f)(2)(ii).

• Line 9: Equals “allocable business interest income” as dened 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 dened 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.

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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 . . . . . . . . . . . . . . .

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.

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.

Enter the amount(s) on line 29 of Worksheet A . . . . .

11. Enter ‐0‐ on 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 4 total column amount of

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- . . . .

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 . . . . . . . . . . . . . . .

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 . . . . . . . . . . . . . . .

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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Stand-Alone Applicable CFC/CFC Group Safe Harbor Election

Section 163(j) Items—Worksheet C

Attach to Your Return

Name of foreign entity

Employer identication 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 specied 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 Business interest income .......... . .... . 1

Business interest expense

.......... . .... . 2

3 Subtract line 2 from line 1. See instructions . . ....... ........ . . 3

Section 3—Qualiﬁed Tentative Taxable Income Calculation

4 Qualied tentative taxable income .......... . . . 4

5 Multiply qualied tentative taxable income (line 4) by the applicable percentage. See instructions . 5

Section 4—Eligible Amount Calculation

6 Section 951(a)(1)(A) amount ........ . . . .... 6

7 Section 951A(a) amount .......... . .... .

8 Section 250 amount .......... . .... . . . 8 ( )

9 Section 245A amount .......... . .... . . 9

( )

10 Total eligible amount. Combine lines 6 through 9 . ... . . . . 10

11 Multiply eligible amount (line 10) by the applicable percentage. See instructions

. ..... . 11

Section 5—Safe-Harbor Calculation

Enter the lesser of line 5 or line 11

.......... . . . ........ . 12

13 Business interest expense

.......... . .... . . ..... . . . 13

14 Subtract line 13 from line 12. See instructions

. . ....... ........ . 14

Section 6—Name and Taxpayer Identiﬁcation Number of All Designated U.S. Persons

Name(s) of all designated U.S. persons

Taxpayer identication number(s) of persons on line 15

Taxable year or specied period (as applicable)

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Paperwork Reduction Act Notice. We

ask for the information on this form to carry

out the Internal Revenue laws of the

United States. You are required to give us

the information. We need it to ensure that

you are complying with these laws and to

allow us to figure and collect the right

amount of tax.

You are not required to provide the

information requested on a form that is

subject to the Paperwork Reduction Act

unless the form displays a valid OMB

control number. Books or records relating

to a form or its instructions must be

retained as long as their contents may

become material in the administration of

any Internal Revenue law. Generally, tax

returns and return information are

confidential, as required by section 6103.

The time needed to complete and file

this form will vary depending on individual

circumstances. The estimated burden for

business taxpayers filing this form is

approved under OMB control number

1545-0123 and is included in the

estimates shown in the instructions for

their business income tax return.

If you have comments concerning the

accuracy of these time estimates or

suggestions for making this form simpler,

we would be happy to hear from you. See

the instructions for the tax return with

which this form is filed.

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