Tax Bill's New Math Could Be Toxic for More Junk-Rated Companies
- Senate uses different method for capping interest deduction
- Switch could mean 38% of junk companies don’t benefit from law
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When U.S. Senate lawmakers changed just two letters used for a calculation in their proposed tax bill, they may have increased the number of junk-rated companies that would be hurt by tax overhaul.
Legislators for both the House of Representatives and the Senate are looking to cap a commonly used corporate deduction, to help limit the cost to taxpayers of the tax cuts they plan. Under current rules, companies can deduct 100 percent of their interest payments from their taxable earnings, while under new proposals, borrowers would only be able to deduct interest equal to less than 30 percent of a measure of their income.