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Section 267A New Final Anti-Hybrid Regulations

Hybrid Deduction Accounts, Foreign Hybrid Mismatch Rules, and Notional Interest Deductions

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, August 13, 2020

Recorded event now available

or call 1-800-926-7926

This course will cover the disallowance of deductions for certain hybrid transactions with related parties under Section 267A, including an analysis of the April 2020 finalized and proposed regulations.


Section 267A combats deduction/no inclusion outcomes (D/NI) related to hybrid transactions and entities intentionally implemented to take advantage of jurisdictional tax differences. The now-final regulations disallow interest and royalty deductions for disqualified hybrid amounts, disqualified imported mismatch amounts, and payments subject to the anti-avoidance rule. Being able to determine whether an arrangement meets these definitions is critical, and not readily apparent, for tax practitioners working with companies transacting internationally.

The rules in Section 267A generally followed OECD's recommendations in its 2015 Base Erosion and Profit Sharing report; however, there are some significant differences. The OECD, for example, does not disallow deductions for imputed interest on interest-free loans.

In addition to the final regulations, proposed regulations issued in April 2020 address hybrid transactions and allocating payments for disqualified deductions under the GILTI provisions. These regulations involve (1) adjustments to hybrid deduction accounts that consider a CFC's earnings and profits included in the income of a U.S. shareholder, (2) requirements for specific anti-conduit rules under Section 881, and (3) updated regulations concerning the deduction allocations related to gap period prepayments in the computation of tested income under GILTI provisions.

Listen as our panel of foreign tax experts explains how to determine which transactions meet the criteria of 267A, the interplay of 267A with OECD's recommendations, and the impact of the final and proposed regulations on hybrid entities and transactions.



  1. Background
  2. Interplay with OECD
  3. Final regulations
  4. Proposed regulations


The panel will review these and other critical issues:

  • Determining what constitutes a foreign deduction or additional tax benefit under the final regulations
  • Maintaining hybrid deduction accounts under 245A(e)
  • Identifying foreign hybrid mismatch payments
  • Variations between the proposed and final regulations
  • How the 267A regulations correspond with OECD and the BEPS report


Dougherty, Alison
Alison N. Dougherty, J.D., LL.M., CPA


Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

Samtoy, John
John Samtoy

Tax Partner
Holthouse Carlin & Van Trigt

Mr. Samtoy’s practice specializes in international tax compliance and consulting services, with a focus on...  |  Read More

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