Ensuring Better Interest Treatment and Deductibility Act (EBITDA)
- Sponsor
- Sen. Capito, Shelley Moore [R-WV]
- Committees
- Finance Committee (primary)
- Last action
- Mar 26, 2026
Bottom line
The bill makes it easier for businesses to deduct interest expenses by loosening the current limitation, potentially reducing their taxable income and federal tax liability.
What it actually does
This bill, titled the "Ensuring Better Interest Treatment and Deductibility Act (EBITDA)," amends Section 163(j)(8)(A) of the Internal Revenue Code of 1986. It repeals a modification to the definition of "adjusted taxable income" (ATI) used for calculating the limitation on business interest deductions. Specifically, it restores the ability for businesses to add back depreciation and amortization expenses when calculating their ATI, effectively reverting the calculation method to one similar to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for purposes of this limitation. This change applies to taxable years beginning after December 31, 2025.
Proponents argue
Supporters argue that restoring the pre-2022 definition of adjusted taxable income for interest deductibility will provide much-needed tax relief to businesses, especially those with significant capital investments and debt. They contend that the current, stricter limitation (which excludes depreciation and amortization from ATI) disproportionately harms capital-intensive industries, stifles investment, and makes it harder for businesses to grow and create jobs. Reverting to an EBITDA-like calculation would align the U.S. tax code more closely with international standards and promote economic expansion.
Opponents contend
Opponents might argue that this change would primarily benefit highly leveraged corporations and could lead to a significant increase in the federal deficit by reducing corporate tax revenues. They may contend that the stricter limitation was a necessary measure to prevent excessive debt financing and ensure a more stable tax base. Critics could also argue that the current rules encourage more prudent financial management and that reverting them would incentivize companies to take on more debt, potentially increasing financial risk.
The bill text is extremely short and straightforward, making it easy for any reader to review quickly. However, understanding its implications requires familiarity with tax code Section 163(j).
Section 2(a)
Repeal of Modification to Adjusted Taxable Income Definition for Business Interest Limitation
This provision amends the Internal Revenue Code to change how "adjusted taxable income" (ATI) is calculated for purposes of limiting the amount of business interest expense a company can deduct. Prior to 2022, businesses could add back depreciation, amortization, and depletion when calculating ATI, making the limitation less restrictive. A subsequent law removed these add-backs, tightening the limitation. This bill repeals that change, allowing businesses to once again include depreciation and amortization in their ATI calculation, thereby increasing the amount of interest they can deduct.
Supporters argue
Supporters argue that this change is crucial for stimulating business investment and growth, particularly for capital-intensive industries that rely on debt financing. They believe the current limitation unfairly penalizes businesses for necessary investments and that restoring the prior rule will foster economic activity and competitiveness.
Critics contend
Critics may argue that this provision represents a tax cut primarily for large, leveraged corporations and could exacerbate the federal deficit. They might contend that the stricter limitation promotes fiscal responsibility and discourages excessive corporate debt, and that reverting it would undermine these goals.
Tradeoffs
The provision balances the desire to encourage business investment and reduce tax burdens on capital-intensive industries against concerns about federal revenue loss and potentially incentivizing higher corporate debt levels.
The bill amends Section 163(j)(8)(A) of the Internal Revenue Code of 1986 by striking clause (vi). This clause, which was added by Public Law 119-21, likely removed depreciation, amortization, and depletion from the calculation of adjusted taxable income (ATI) for purposes of the business interest deduction limitation. By striking it, the bill restores the ability to add back these non-cash expenses, effectively broadening the ATI base.
Section 2(a)
Why it matters:This is standard legislative practice for amending existing statutes. It's not necessarily evasive but requires specialized knowledge to interpret.
Case for: Proponents argue that this precise legal language is necessary for clarity and accuracy within the complex tax code, ensuring that the intended change is implemented without ambiguity.
Case against: Critics might argue that such technical drafting makes tax law inaccessible to the public and even many policymakers, obscuring the real-world implications of legislative changes.
Estimated impact: The impact is significant for businesses with substantial capital investments and debt, as it directly affects their ability to deduct interest expenses, potentially leading to lower tax liabilities and reduced federal revenue.