Hey, you. Yes, you. Big corporation that just HAD to have a huge tax cut. Well, you got your way: of the $1.5 trillion in tax breaks in the House bill, nearly $1 trillion of it winds up right in your already-plump pockets.
But you might want to wipe that smug look off your face. Sure, the corporate rate will plummet from 35% to 20% if the bill becomes law, but the House’s proposal wasn’t ALL good news for big business. Like any tax bill, there was some give and take.
Let’s take a look:
Take: Borrowing Got More Expensive
Businesses borrow money; probably more than they should. What makes it palatable, however, is that a deduction is currently allowed for the interest expense, reducing the after-tax cost of borrowing.
The House bill would end that gravy train, however, by disallowing a businesses’ net interest expense (interest expense in excess of income) in excess of 30% of the company’s EBITDA. That’s right, you heard me…EBITDA is now factoring into tax calculations. Please give me more of that sweet, sweet simplicity.
Authored by Tony Nitti, Withum Partner and writer for Forbes.com.