New Section 267A -- Certain related party amounts paid or accrued in hybrid 
transactions or with hybrid entities. Section 267A of the Internal Revenue Code provides rules that neutralize certain hybrid mismatches, in order to prevent certain DD outcomes, D/NI outcomes, and indirect D/NI outcomes. Section 267A provides (or, in conjunction with regulations that could in the future be issued thereunder, could provide) results consistent with the BEPS Action Item 2 Report, Recommendation 1 (primary rule), Recommendation 3 (primary rule), Recommendation 4, and Recommendation 8, to the extent a hybrid mismatch would otherwise exist as a result of interest or royalties paid or accrued to related parties. Section 267A generally denies a deduction for the amount of interest or royalty paid or accrued to a related party if (i) in the payee jurisdiction, either the amount is not included in the related partys income or the related party is allowed a deduction for the amount, and (ii) the amount is paid or accrued pursuant to a hybrid transaction or by or to a hybrid entity. For this purpose, a hybrid transaction means any transaction, series of transactions, agreement, or instrument giving rise to a payment that is treated as interest or a royalty for U.S. tax purposes but is not so treated for foreign tax purposes. In addition, a hybrid entity is an entity that either is transparent for U.S. tax purposes but opaque for foreign tax purposes, or is opaque for U.S. tax purposes but transparent for foreign tax purposes. Section 267A broadly authorizes regulations to, among other things, (i) address certain conduit arrangement (e.g., imported mismatches), (ii) address certain structured transactions, (iii) disqualify the entire amount of interest or royalty if subject to a participation exemption system or other system which provides for the exclusion or deduction of a substantial porrtion of such amount, and (iv) apply the rules of section 267A to branches or U.S. entities. Proposed Regulations. The Treasury Department and the Internal Revenue Service are currently working on proposed regulations to implement section 267A and section 245A(e). The goal is to issue most proposed guidance implementing the new tax reform provisions by the end of the calendar year.