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On December 22, 2017, Tax Cuts and Jobs Act (TCJA) was signed into law, making significant changes to the United States (U.S.) tax code. As the current tax season is underway, there has been discussion concerning how the tax code changes may impact the country and the individual. One of the more influential changes related to the TCJA is lowering the corporate tax rate from 35% to 21%. This change alone creates a loss of $1.3 trillion over the next decade (Center on Budget and Policy Priorities, 2018). To partially counteract this loss, Congress revised Sec. 163(j) to add stricter limitations on the deduction of business interest expenses. These limitations have the potential to make up a portion of the loss.

The changes to Sec. 163(j)1 have the potential to influence the capital structure of C corporations2 as well as the decision-making process to finance their operations.3 To address the change in Sec. 163(j) and the impacts on C corporations, this paper will discuss the history of the code section, involving defining earning stripping, the language of the current code section, explaining the new limitations, and a comparison between the prior and current code section. Next, the paper will run through a problem comparing the prior and current code section to better illustrate the impact of the change. Finally, the paper will discuss considerations for C corporations and the future possibilities of the code section’s influence.

While all forms of businesses and individuals are potentially limited by Sec. 163(j), the paper will analyze the impact of the change on C corporations. Hereafter, C corporation will be referred to simply as corporations.


File nameDate UploadedVisibilityFile size
19 Jul 2022
670 kB



  • Advisor
    • Dr. Ellen Best, Dr. Victor Parker, Dr. Steve Smith

  • Department
    • Accountancy

  • Date submitted

    19 July 2022

  • Keywords