Dear Majority Leader Thune and Chairman Crapo:
We, the undersigned companies and associations write in strong support of reinstating the earnings before interest, tax, depreciation, and amortization (EBITDA) standard for business interest deductions. Beginning in 2022, this standard shifted to the less favorable earnings before interest and tax (EBIT) standard, making it harder for U.S. job creators to raise capital, hire new workers, and grow.
The shift to an EBIT standard brings with it a variety of negative consequences. For capital intensive industries, the loss of depreciation and amortization (the “DA”) in the calculation means higher taxes and decreased investment. For businesses that rely on borrowing – especially industries with long repayment periods – these higher after-tax costs can mean less expansion, hiring slowdowns, and decreased capital investment. For all industries, the EBIT standard means reduced cash flows and reduced flexibility to handle downturns. The benefits of bonus depreciation are diminished due to the EBIT standard. Under the EBIT standard, every additional dollar of depreciation lowers a taxpayer’s interest deduction by 30%, weakening the intended incentive of bonus depreciation. Consequently, restoring the EBITDA standard is essential to maximize the incentives for capital intensive companies to invest in America.
A 2023 EY study helps quantify these impacts; the study shows that over the long run, limiting the ability to deduct interest on debt-financed investments could cost the U.S. economy:
- up to 867,000 jobs,
- $58 billion in employee compensation, and
- $108 billion in GDP.
The industries impacted by the change from EBITDA to EBIT represent almost every facet of the U.S. economy. A PwC report found that the manufacturing and information industries would pay the most in new tax obligations under an EBIT standard, while accommodation and food services, mining, and transportation and warehousing would experience the greatest percentage tax increases.
We applaud the House passage of H.R. 1 which reinstated the EBITDA standard for a period of five years. However, to maximize the growth impact, we urge the Senate to make this vital provision permanent.
Sincerely,
Alliance for Chemical Distribution
Altice USA
American Car Rental Association
American Forest & Paper Association (AF&PA)
American Gaming Association
American Hotel and Lodging Association
American Investment Council (AIC)
Asurion
Ballard Brands
Bloomin’ Blinds
Camp Bow Wow
Charter Communications
FASTSIGNS International
Home Helpers Home Care
International Franchise Association (IFA)
Interstate Natural Gas Association of America (INGAA)
Lumen
MY SALON SUITE
National Association of Broadcasters
National Restaurant Association
NerdsToGo
Nielson
Propelled Brands
The Internet & Television Association (NCTA)
The Rural Broadband Association (NTCA)
The Williams Companies
Truck Renting and Leasing Association
U.S. Chamber of Commerce
U.S. Telecom (USTA)
Waters Edge Wineries
We Sell Restaurants
Wild Birds Unlimited
Wisdom Senior Care