AICPA issues TQAs related to Sec. 163(j), GASB 84

By Ken Tysiac

The AICPA issued separate Technical Questions and Answers on Thursday to provide nonauthoritative guidance in response to the amendment of Internal Revenue Code Sec. 163(j) and related to GASB’s fiduciary activities guidance.

Technical Questions and Answers (TQAs) 3300.01–.02 provide guidance relevant to Sec. 163(j), which was amended in 2017 to limit the deduction for business interest to the sum of (1) business interest income; (2) 30% of the taxpayer’s adjusted taxable income for the tax year; and (3) the taxpayer’s floor plan financing interest for the tax year. Any disallowed business interest deduction can be carried forward indefinitely (with certain restrictions for partnerships). The limitation was generally effective for tax years beginning after Dec. 31, 2017, and applies to all taxpayers, except certain trades or businesses listed in Sec. 163(j)(7) and taxpayers with average annual gross receipts that do not exceed $25 million.

The TQAs discuss how an entity should assess realizability of its existing deferred tax assets related to disallowed interest deductions when there are:

  • Reversing deferred tax liabilities, and
  • An expectation of future interest expense that will also be limited under Sec. 163(j).

TQAs 6950.23–.24 provide background information on how GASB Statement No. 84, Fiduciary Activities, changes the framework used to evaluate whether activities are fiduciary in nature. The TQAs also describe the standard’s clarification that the reporting of fiduciary activities applies also to special-purpose governments engaged in business-type activities.

Under the standard, some of these governments will be reporting fiduciary activities for the first time. The TQAs describe how an auditor would assess the appropriateness of such a government’s omission of its only fiduciary fund in the financial statements when the government considers the omission to be immaterial.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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