Kevin McCoy

USA TODAY

Heeding concerns raised by U.S. companies, the Department of the Treasury announced less restrictive than expected final regulations aimed at reining in a corporate tax-saving strategy.

The rules, part of the Obama administration's years-long crackdown on so-called corporate tax inversions, include some exceptions to a sweeping plan announced in April that similarly targeted a tactic known as earnings stripping.

Inversions are legally allowed transactions in which a U.S. corporation merges with a company in a lower-tax nation and reincorporates its headquarters there while leaving domestic operations intact. The move often reduces tax bills.

Feds move to slam shut tax inversion loophole

Corporations that complete inversions have often used earnings stripping — which typically involves increasing the firm's debt to an affiliated foreign entity — as part of their tax-reduction efforts.

Treasury Secretary Jacob Lew said Thursday that the final regulations were enacted after consideration of concerns raised by corporate America. "We have addressed stakeholder concerns by more narrowly focusing the final regulations on aggressive tax-avoidance tactics and providing certain limited exceptions," he said.

The rules limit the ability of corporations to treat financial instruments that are purported to be debt as equity in certain circumstances. Additionally, corporations that claim interest deductions on related-party loans must provide documentation for those loans. The rules apply to U.S. affiliates of a corporate group.

Limited exemptions allow transactions between foreign subsidiaries of U.S. multinational corporations, as well as transactions between regulated financial companies and regulated insurance companies. Transactions between mutual funds and real estate investment trusts, other than those owned by affiliated groups of companies, are also exempt.

Obama steps up criticism of tax inversions

The rules mark the latest phase of the White House effort to make corporate tax inversions less attractive. President Obama has characterized the practice as "gaming the system," and the administration has maintained the regulations were necessary because lawmakers haven't resolved differences over tax issues.

$160 billion Pfizer, Allergan inversion scrapped

The regulations have stopped at least one proposed transaction. After the rules were announced in April, U.S. pharmaceutical giant Pfizer scrapped a proposed $160 billion merger with Ireland-based rival Allergan.

Sen. Orrin Hatch, R-Utah, who chairs the Senate Committee on Finance, warned that the new rules "could jeopardize American businesses and the U.S. economy."

The panel's ranking minority member, Sen. Ron Wyden, D-Ore., said the rules "will go a long way to protecting our corporate tax base" but do not change "the need for tax reform" through bipartisan congressional action.

Contributing: Associated Press

Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc