Section 461(l) is one of the more curious provisions of the sweeping Tax Cuts and Jobs Act that was enacted at the end of 2017. Section 461(l) prohibits owners of non-C-corporation businesses from offsetting trade-or-business losses above a certain threshold against nonbusiness income in the taxable year of the loss. Under the new rule, such “excess business losses” are instead carried over to the next taxable year as a net operating loss. The “excess” losses that section 461(l) disallows are active business losses—that is, losses borne by material participants in the business in question. This marks a significant change from prior law, under which active business losses were generally deductible against nonbusiness income without limit. In the first instance, section 461(l) is curious because it introduces a substantial new tax burden on small-business owners—in direct contradiction to Congress’s oftstated goal of supporting small business. What makes the new loss limitation even more perplexing is that it serves no useful policy purpose whatsoever. Instead, section 461(l)’s excess-business-loss limitation violates a foundational income tax precept by preventing a taxpayer from netting all of the costs of producing income against gross receipts. In so doing, the new rule causes such a taxpayer to be taxed on an amount greater than her economic income. Indeed, in some cases, it requires a taxpayer to pay federal income tax even though she incurs an economic loss for the year. On top of all that, there are myriad ambiguities in section 461(l)’s language, which make it nearly impossible to tell how the rule actually works in a number of situations. After describing the basic mechanics of section 461(l), this Article examines in detail the most significant interpretive uncertainties that plague the provision. Next, the Article explains why section 461(l) is bad public policy. Ultimately, the Article argues that section 461(l) should be repealed as soon as possible—but it also recognizes that an immediate repeal of the provision may be politically unlikely. Thus, in the meantime, the Article suggests specific interpretations that would resolve section 461(l)’s ambiguities and apply the excess-business-loss limitation as narrowly as possible. Adopting the interpretations proposed herein would not be enough to solve all of the problems inherent in section 461(l). Only a complete repeal could do that. But adopting the narrowest reasonable construction of the provision will at least limit the harm that the misguided new rule can do for so long as it remains in effect.