Skip to main content

Legal Update

IRS Confirms Loan Commitment Fees Are Deductible Business Expenses

29 June 2018
Mayer Brown Legal Update
The 2017 Tax Act (known as the “Tax Cuts and Jobs Act”) created substantial limitations on the ability of US taxpayers to deduct interest expense, most notably in Section 163(j) of the Tax Code. Accordingly, if expenses incurred in connection with borrowing transactions can be characterized as business expenses instead of interest expense, the borrower will be less likely to run up against those limitations. In a recent audit memorandum, the US Internal Revenue Service provided guidance on when “unused commitment fees” can be treated as deductible business expenses. Mark Leeds and Brennan Young, both tax practitioners with the New York office of Mayer Brown, examine this guidance and provide their thoughts and insights on how borrowers can structure the costs of borrowings as tax deductible expenses, instead of interest.

Authors

  • Mark H. Leeds
    T +1 212 506 2499
  • Brennan W. Young
    T +1 212 506 2691
The Build a Report feature requires the use of cookies to function properly. Cookies are small text files that are placed on your computer by websites that you visit. They are widely used in order to make websites work, or work more efficiently. If you do not accept cookies, this function will not work. For more information please see our Privacy Policy

You have no pages selected. Please select pages to email then resubmit.