U.S. Treasury moves aggressively to curb corporate tax inversions

Late Monday, the U.S. Treasury Department and Internal Revenue Service announced new rules to quash corporate inversions, where an American company buys a foreign rival then moves the company's address abroad to sharply lower their U.S. taxes. It is the third set of Treasury rules aimed at corporate inversions, but this pair of changes — affecting a tax maneuver called earnings stripping and also serial inverters — is seen as the most effective yet. "It's going to be a major impediment. They're pretty much taking all of the juice out of inversions," tax analyst Robert Willens tells The Wall Street Journal. "They've addressed literally every benefit that one attempted to gain from an inversion and shut them all down systematically."

The rules apply to all deals that close after Monday, and the first victim could be the largest proposed corporate inversion yet, Pfizer's $160 billion takeover of Dublin-domiciled rival Allergan. Allergan's shares fell 21 percent in after-hours trading. That merger has become an object of criticism on the presidential campaign trail, a rare area of agreement between Hillary Clinton and Donald Trump.

The rash of corporate inversions in recent years has vexed the Treasury Department, and Congress has not acted on the Obama administration's requests to curb the tax maneuvers through legislation. The new rules will only "slow the pace of these transactions," Treasury Secretary Jack Lew acknowledged, but said any action is worthwhile. "After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States — including our rule of law, skilled workforce, infrastructure, and research and development capabilities — all while shifting a greater tax burden to other businesses and American families."

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House Ways and Means Committee Chairman Kevin Brady (R-Texas) did not seem eager to strengthen Lew's hand with new regulation, calling the new rules "punitive" measures that will hurt U.S. companies and tamp down investment.