No deduction shall be allowed under this chapter for any disqualified related party amount paid or accrued pursuant to a hybrid transaction or by, or to, a hybrid entity.
For purposes of this section—
The term "disqualified related party amount" means any interest or royalty paid or accrued to a related party to the extent that—
(A) such amount is not included in the income of such related party under the tax law of the country of which such related party is a resident for tax purposes or is subject to tax, or
(B) such related party is allowed a deduction with respect to such amount under the tax law of such country.
Such term shall not include any payment to the extent such payment is included in the gross income of a United States shareholder under section 951(a).
The term "related party" means a related person as defined in section 954(d)(3), except that such section shall be applied with respect to the person making the payment described in paragraph (1) in lieu of the controlled foreign corporation otherwise referred to in such section.
For purposes of this section, the term "hybrid transaction" means any transaction, series of transactions, agreement, or instrument one or more payments with respect to which are treated as interest or royalties for purposes of this chapter and which are not so treated for purposes the tax law of the foreign country of which the recipient of such payment is resident for tax purposes or is subject to tax.
For purposes of this section, the term "hybrid entity" means any entity which is either—
(1) treated as fiscally transparent for purposes of this chapter but not so treated for purposes of the tax law of the foreign country of which the entity is resident for tax purposes or is subject to tax, or
(2) treated as fiscally transparent for purposes of such tax law but not so treated for purposes of this chapter.
The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance providing for—
(1) rules for treating certain conduit arrangements which involve a hybrid transaction or a hybrid entity as subject to subsection (a),
(2) rules for the application of this section to branches or domestic entities,
(3) rules for treating certain structured transactions as subject to subsection (a),
(4) rules for treating a tax preference as an exclusion from income for purposes of applying subsection (b)(1) if such tax preference has the effect of reducing the generally applicable statutory rate by 25 percent or more,
(5) rules for treating the entire amount of interest or royalty paid or accrued to a related party as a disqualified related party amount if such amount is subject to a participation exemption system or other system which provides for the exclusion or deduction of a substantial portion of such amount,
(6) rules for determining the tax residence of a foreign entity if the entity is otherwise considered a resident of more than one country or of no country,
(7) exceptions from subsection (a) with respect to—
(A) cases in which the disqualified related party amount is taxed under the laws of a foreign country other than the country of which the related party is a resident for tax purposes, and
(B) other cases which the Secretary determines do not present a risk of eroding the Federal tax base,
(8) requirements for record keeping and information reporting in addition to any requirements imposed by section 6038A.
(Added Pub. L. 115–97, title I, §14222(a), Dec. 22, 2017, 131 Stat. 2219.)
Pub. L. 115–97, title I, §14222(c), Dec. 22, 2017, 131 Stat. 2220, provided that: "The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 2017."
§ 1.267A-1 | Disallowance of certain interest and royalty deductions |
§ 1.267A-2 | Hybrid and branch arrangements |
§ 1.267A-3 | Income inclusions and amounts not treated as disqualified hybrid amounts |
§ 1.267A-4 | Disqualified imported mismatch amounts |
§ 1.267A-5 | Definitions and special rules |
§ 1.267A-6 | Examples |
§ 1.267A-7 | Applicability dates |
The Regulations cited above were determined based on programmatic database analysis using data provided by the Government Publishing Office. TouchTax attempts to hide unrelated regulation provisions. Due to limited GPO data, however, certain unrelated regulations may appear in some instances.
 The preliminary Code is a preliminary release of the Internal Revenue Code of 1986 (the "Code") by the Office of the Law Revision Counsel and is subject to further revision before it is released again as a final version. The source of the preliminary Code used in TouchTax is available here: https://uscode.house.gov/download/download.shtml. The Code is a consolidation and codification by subject matter of the general and permanent laws of the U.S. prepared by the Office of the Law Revision Counsel of the U.S. House of Representatives. The Treasury Regulations are a codification of the general and permanent rules published in the Federal Register by the departments and agencies of the federal government. The version of the Treasury Regulations available within TouchTax is part of the Electronic Code of Federal Regulations which is not an official legal edition of the Code of Federal Regulations but is an editorial compilation of CFR material and Federal Register amendments produced by the National Archives and Records Administration's Office of the Federal Register (OFR) and the Government Publishing Office. The source of the CFR used in TouchTax is available here: https://www.govinfo.gov/bulkdata/ECFR/title-26. Those using TouchTax for legal research should verify their results against the printed versions of the Code and Treasury Regulations. TouchTax is copyright 2024 by Com-Lab (Mobile). Learn more at http://touchtax.edrich.de.