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U.S. Treasury clamps down on company inversions to cut taxes

The U.S. Treasury Department announced steps Monday that will make it harder for U.S. companies to move their addresses outside the country to reduce their taxes, clamping down on the practice known as inversions.

The rules, which apply to deals with closings Monday or after, include a prohibition on "hopscotch" loans that let companies access foreign cash without paying U.S. taxes and curbs on actions that companies can take to make an inversion attractive for tax purposes.

Treasury Secretary Jacob J. Lew told reporters on a conference call Monday that he wanted to make companies think twice before considering an inversion. He said Treasury also is reviewing other potential actions it can take.

"This action will significantly diminish the ability of inverted companies to escape U.S. taxation," he said. "For some companies considering deals, today's action will mean that inversions no longer make economic sense."

The changes could cause difficulty for companies such as Medtronic Inc. that rely on foreign cash to finance pending deals. The administration has been trying to stem inversions, in which companies seek foreign addresses through mergers though their executives and major operations remain in the United States.

Lew and President Barack Obama had urged Congress to pass a bill that would prevent U.S. corporations from buying smaller foreign businesses and taking their addresses. Congress deadlocked, and the Democratic-backed bills haven't come to a vote.

Lew, who had said in July that Treasury lacked authority to stem inversions, reversed himself in August and the administration began studying its options. In recent days Lew said the department was completing its work.

Obama has criticized inversions. "The practice they're engaging is the same kind of behavior that keeps middle-class and working-class families working harder and harder just to keep up," Obama said July 24 in Los Angeles.

There are eight pending inversions, including Burger King Worldwide Inc.'s planned merger with Tim Hortons Inc., which would put the combined company's headquarters in Canada.

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