Treasury Secretary Jack Lew said the new rules would at least lead companies to second-guess the benefits of shifting their legal addresses abroad — and slashing their tax bills in the process.
The new rules target the economic benefits of the tax deals and seek to make it more difficult for companies to complete these kinds of cross-border-mergers, known as “inversions.”
“These transactions may be legal, but they’re wrong,” Lew told reporters on Monday.
“For some companies considering deals, today’s action will mean that inversions no longer make economic sense.”
Still, Lew also stressed the new rules, which would go into effect for deals that close Monday or after, don’t eliminate the need for Congress to act when it returns to Washington after November’s elections.
The secretary added that the department would consider further rules if Congress remains deadlocked on how to stop the deals.
This ensures that offshore tax deals will continue to be a potent political debate this year, after Democrats have questioned the patriotism of companies that move abroad.
“I believe America does better when hard work pays off, responsibility is rewarded, and everyone plays by the same set of rules,” President Obama said in a Monday statement praising Lew and the new rules.
The Treasury’s announcement could give a new spark to a Democratic campaign issue that has yet to catch fire with voters.
Democrats have hammered companies like Burger King, medical device-maker Medtronic and pharmaceutical company AbbVie for seeking to reincorporate abroad.