U.S. Releases Anti-hybrid Regulations

On April 7, 2020, the Internal Revenue Service (IRS) and U.S. Treasury Department released the final regulations and additional proposed regulations under the Tax Cuts and Jobs Act to curtail exploitation of differences in tax characterizations on cross-border transactions. These "hybrid entities" or "hybrid transactions" often led to cross-border transactions involving an income deduction in the U.S. without a corresponding income inclusion in a non-U.S. country or an income deduction on both sides of the border. Although many structures involving Canada and the U.S. have had to be unwound as a result of these changes, there are still other corporate tax structures available to accomplish many of the same objectives.