On 20 December 2018, IRS issued proposed regulations implementing sections 245A(e) and 267A that were added with the enactment of the Tax Cuts and Jobs Act (TCJA).

The proposed Regulations concern sections 245A (e) and 267A relating to hybrid dividends and certain amounts paid or accrued in hybrid or hybrid transactions or with hybrid entities. Section 245A permits deduction of certain dividends from related parties, except for certain hybrid dividends, and Section 267A prohibits deduction of certain amounts paid in a hybrid transaction with a related party or to a related hybrid entity. The proposed provisions under Section 267A clarify the application of the provision, and the guidance under Section 245A (e) defines hybrid dividends and clarifies the interaction between the provision and foreign tax laws.

The proposed regulations point out that if the regulations are finalized by 22 June 2019, they will generally be effective on 1 January 2018. However, if the proposed the regulations are not finalized by 22 June 2019, they will be on 20 December 2018. The Ministry of Finance has requested comments on proposed regulations by 26 February 2019.