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Neutralizing effects of hybrid mismatch arrangementsState of the payer. It seems that this rule is intended to apply withpriority over the rule for the State of the payer to deny a deduction. 85However, the denial of a deduction in the payer State does not seem tobe triggered where the investor State offers a different form of dividendrelief, such as a lower tax rate or dividend tax credits. This is becausethere is no D/NI outcome.To apply the primary rule in the context of hybrid financialinstruments and transfers, the State of the payer must determinewhether the recipient is exempt in the investor State. For this purpose,the State of the payer will require information about the investor’stax affairs of a nature that many countries are not used to asking for.Further, the State of the payer must be satisfied that the exemption isdue to the hybrid mismatch arrangement and not, for example, someother status, such as an exemption for non-profit organizations. 86 Forthis purpose, the OECD proposes a test of whether the mismatchwould arise if the arrangement were “directly entered into betweenresident taxpayers of ordinary status.” 87 It may be difficult to determinewhether a foreign investor is of “ordinary status” in another State,for example, what should be compared if two “ordinary” taxpayershave a different treatment, such as that for individuals and that forcompanies?Further, the payer State adjustment should only be “to theextent” that the amount is not included in ordinary income. 88 TheOECD suggests that the methodology for this apportionment shouldbe left to domestic law, but no guidance or examples are provided. 89This could be an administratively difficult task, for example, would the85Ibid., paragraphs 113-116. OECD Action 2 — 2014 Deliverable, supranote 2, is unclear about the interface between Recommendation 1 and Recommendation2, paragraph 1.86OECD Public Discussion Draft on BEPS Action 2 — Domestic Issues,supra note 2, paragraphs 96-102.87Recommendation 1, paragraph 3, OECD Action 2 — 2014 Deliverable,supra note 2, 38.88Recommendation 1, paragraph 1 (a), OECD Action 2 — 2014 Deliverable,supra note 2, 37.89OECD Public Discussion Draft on BEPS Action 2 — Domestic Issues,supra note 2, paragraph 103.233