On March 18, 2026, the IRS issued Revenue Procedure 2026-17 (the Procedure), which permits taxpayers to revoke certain previously “irrevocable” elections under the §163(j) business interest deduction limitation regime. Most notably, the relief applies to the real property trade or business (RPTOB) election and the controlled foreign corporation (CFC) group election.[1]

These elections often were made under different economic assumptions and under tax rules that shifted materially with the One Big Beautiful Bill Act (OBBBA), including changes to the §163(j) business interest deduction limitation calculation and the reinstatement of 100% first-year bonus depreciation under §168(k). The Procedure gives taxpayers a narrow window to reconsider those decisions.

Although the relief provides a meaningful opportunity to revisit prior elections, decisions are not uniform. Taxpayers must undertake careful, multi-year analysis and modeling to weigh potential benefits against collateral consequences. This alert summarizes key aspects of the Procedure and highlights practical considerations for affected taxpayers.

The Election Balancing Act

As a result of the Tax Cuts and Jobs Act (TCJA), beginning in 2022, the §163(j) limitation was based on EBIT instead of EBITDA. In addition, the TCJA phased down the 100% first year bonus depreciation by a rate of 20% each year, beginning in 2023. Many taxpayers, particularly those in the real estate sector, concluded that opting out of bonus depreciation with the RPTOB election had a modest long-term cost. They received relief from the §163(j) limitation in exchange for depreciating certain property under the alternative depreciation system (ADS).

OBBBA significantly alters that analysis. The §163(j) limitation has reverted to an EBITDA-based limitation, generally increasing interest expense deduction capacity, while 100% bonus depreciation has generally been reinstated permanently for qualifying property acquired on or after January 19, 2025.

A&M Insight: The ability to retroactively withdraw a RPTOB election that was made in 2022, 2023, or 2024, will be welcomed by many taxpayers whose elections were made under markedly different conditions. In certain cases, the return to an EBITDA-based limitation, combined with the 100% bonus depreciation deductions may generate incremental deductions without materially restricting interest expense, as the depreciation deductions generally do not reduce the §163(j) limitation. For taxpayers subject to the Corporate Alternative Minimum Tax (CAMT), higher regular tax depreciation may also improve cash tax outcomes without increasing CAMT liability because regular tax depreciation is imported into the CAMT base.

But revoking an RPTOB election is not always advantageous and may be affirmatively adverse in certain circumstances. Taxpayers with rising interest expense, such as those with variable-rate debt, may find that the benefits of the additional depreciation deductions are outweighed by reduced interest expense deductions. In addition, OBBBA excludes certain foreign income inclusions attributable to CFCs (including Subpart F and net CFC tested income) from the §163(j) limitation calculation. Accordingly, taxpayers with significant foreign operations and limited domestic depreciation may see reduced interest deduction capacity after revocation of an RPTOB election. And in tiered structures—common in private equity and venture capital—RPTOB elections are often made deliberately at lower-tier operating entities to enable interest expense deductions at an upper-tier borrower. Revoking an RPTOB election at one level may have unintended consequences elsewhere in the structure.

Multinational Groups – Shifting Aggregation Benefits

The CFC group election allows a multinational group to apply the §163(j) limitation to certain CFCs on a combined, aggregate basis rather than on a CFC-by-CFC basis. Historically, this election mitigated inefficient outcomes where one CFC has excess limitation capacity while another incurred disallowed interest expense. Under proposed regulations, the CFC group election also permitted a U.S. shareholder (USSH) to take into account the CFC group’s aggregate excess capacity in determining its own §163(j) limitation.

OBBBA materially affects the value of aggregation. Although a CFC group election may still allow additional interest deductions at the CFC level (potentially reducing Subpart F or net CFC tested income inclusions), those inclusions are now excluded from a USSH’s §163(j) limitation calculation. As a result, the multiplier benefit on interest deductibility that once justified the complexity of a CFC group election is diminished.

A&M Insight: Many taxpayers believe that, notwithstanding a CFC group election, a USSH may no longer use the CFC group’s aggregate excess capacity to increase its §163(j) limitation. The Procedure acknowledges the implications of OBBBA but does not confirm whether the proposed regulations permitting a USSH to leverage a CFC group’s aggregate excess capacity still apply, leaving uncertainty.

The Procedure provides transition relief allowing taxpayers to revoke or make a CFC group election for the first specified period beginning after December 31, 2024—without regard to the normal 60-month limitation—effectively creating a one-time reset for 2025.

A&M Insight: This reset lets multinational groups reassess whether aggregation still yields net benefits under OBBBA. Beyond economics, aggregation introduces administrative complexity, including tracking group limitations, allocating disallowed interest, and modeling downstream effects on earnings and profits, foreign tax credits, and distribution planning. Forgoing the election may offer operational flexibility where financing decisions are made at the CFC level. Because any election made (or revoked) for 2025 will apply for the next five years, taxpayers should treat this as a strategic planning imperative and modeling exercise, rather than routine compliance.

Partnership Procedural Path – A Substantive Decision

Under the BBA audit regime, adjustments to partnership items are generally determined and collected at the partnership level, instead of flowing through to partners via amended Schedules K‑1. As a result, post-filing changes are typically implemented through an Administrative Adjustment Request (AAR), which can be complex and lead to different outcomes than amended returns.

The Procedure allows eligible BBA partnerships flexibility to implement the RPTOB election relief either by filing an amended partnership return or an AAR.

A&M Insight: Although this choice may appear procedural, it can have substantive consequences for both the partnership and its partners. The decision is more about how the adjustments are absorbed, allocated, and administered across the partnership structure. In many cases, the AAR will be the more practical and controlled approach. Filing an amended return generally requires reopening partner reporting for prior years, which can be challenging when ownership has changed, capital accounts must be recomputed, or partners must amend their own returns and recalculate basis and loss limitations. By contrast, an AAR centralizes implementation at the partnership level, promotes consistent treatment across partners, and reduces mismatches, disputes, or cascading revisions—often a critical advantage for partnerships with partner turnover and complex capital structures.

Additionally, the Procedure appears to allow including other changes in an amended return beyond the change to the RPTOB election, instead of requiring an AAR for such changes.

State tax considerations further complicate the analysis. Many states do not conform to federal §163(j) rules or to BBA procedures. While amended returns may be simpler administratively in some jurisdictions, AARs often require parallel state filings, especially in tiered structures. As a result, partnerships should evaluate federal and state implications together, rather than viewing the procedural choice in isolation.

A&M Tax Says

The Procedure provides a limited window for taxpayers to reassess elections made under very different economic and legislative conditions. Importantly, the Procedure does not extend the normal statute of limitation for refund claims nor the due dates for filing tax returns. As a result, timing considerations may drive outcomes as much as substantive eligibility. For example, taxpayers that made an RPTOB election on a 2022 return may face deadlines earlier than October 15, 2026, depending on when the return was filed. Similarly, the CFC group election must be made on an originally filed tax return for the first specified period beginning after December 31, 2024. Accordingly, if a taxpayer has already filed their 2025 tax return, there appears to be no relief under the Procedure.

As highlighted throughout this alert, deciding whether to make or revoke an election is not a simple “do-over.” It often requires entity-by-entity modeling, coordination across multiple years, and attention to applicable procedural rules, as the interest expense and depreciation expense deductions interplay with many other provisions. For example, OBBBA modified the rules for expense allocations to net CFC tested income at the USSH level, which may affect whether a USSH generates an overall domestic loss (ODL) with consequences for the optimal utilization of domestic and foreign tax attributes.

Taxpayers considering action under the Procedure should confirm eligibility and materiality, quantify the cash-tax impact, assess the collateral consequences (including state conformity and filing requirements), and then determine the appropriate path for implementation.

Alvarez & Marsal Tax professionals are available to help you quickly evaluate eligibility and timing, model entity‑by‑entity multi‑year outcomes, and navigate the requirements for obtaining relief under the Procedure.

[1]The RPTOB election is generally permanent, while the CFC group election generally cannot be revoked, or re-made after revocation, for 60 months.