Ensuring Better Interest Treatment and Deductibility Act (EBITDA)

This legislation aims to modify the Internal Revenue Code to change the way businesses calculate their interest expense deductions. Specifically, the bill proposes to restore the use of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) as the basis for the interest limitation calculation. This would replace the current, more restrictive standard that is based on Earnings Before Interest and Taxes (EBIT), which went into effect in recent years.

If enacted, this change would likely allow many capital-intensive businesses to deduct a larger portion of their interest costs from their taxable income. Proponents generally argue that this adjustment encourages domestic investment in equipment and infrastructure by lowering the after-tax cost of borrowing. For everyday citizens, the bill's primary impact would be felt indirectly through potential changes in corporate investment patterns and economic activity in sectors like manufacturing and construction.