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Next Big Tax Fight Could Pit Wall Street Against Private Equity

By: True Partners Consulting Staff |

By Lynnley Browning
February 27, 2017

Debate over a border-adjustment tax is consuming Washington, but another, less-discussed proposal in House Speaker Paul Ryan’s tax plan stands a better chance of being included in a GOP overhaul bill.

The measure would force companies to include the interest they pay on loans in their taxable income. That could pit financial services firms such as banks and insurers that have been promised relief from the proposal against private equity firms, which rely on leverage and wouldn’t get special treatment.

As Ryan struggles to get support within his own party for border adjustments, the interest provision is more likely to be included in a House tax bill, according to Robert Willens, an independent tax and accounting expert. That’s because eliminating interest deductions may be politically easier for Congress to support since consumers wouldn’t be directly affected, as critics of border adjustability argue, Willens said.

More House Republicans are also supportive of making the tax treatment of debt equal to that of equity, which the GOP interest provision would effectively do, since companies can’t currently deduct dividend payments, according to Willens.

Companies are “just starting to get their minds around it and to think about how it will affect them,” said Robert Gordon, managing director at True Partners Consulting, a corporate tax consulting firm and a former senior tax executive at BP Plc.