The Obama administration is issuing new regulations in an effort to stem the trend of American corporations relocating their operations overseas in order to avoid paying U.S. taxes. But some companies are already devising ways to get around those restrictions—most notably pharmaceutical giant Pfizer, whose approval this weekend of a deal to acquire offshore drug maker Allergan is expected to secure Pfizer a prized lower tax rate.

The new rules crafted by the Department of the Treasury and the Internal Revenue Service would target companies that set up their headquarters overseas, often through purchases of, or mergers with, foreign businesses to reduce their tax burden through corporate inversions.

The New York Times reported that the “new measures will make that more difficult by curtailing companies’ ability to avoid United States tax rates if they move to locations where they lack substantial business activity.”

Experts, however, said the rules don’t go far enough to really impact corporate inversions. “It’s not going to do anything to affect in any meaningful way the largest deal that is in front of them,” Stephen E. Shay, a senior lecturer at Harvard Law School, told the Times.

Shay was referring to the potential deal between Pfizer and Allergan, whereby Pfizer would buy Allergan for $150 billion and relocate its New York City headquarters to Ireland, where Allergan is headquartered. In response to the proposed regulations, Pfizer has reportedly begun to structure the purchase so that Allergan would technically be the buyer, even though Pfizer is making the purchase. Such a maneuver would, Pfizer believes, prevent the deal from being classified as an inversion and cause it to fall outside the scope of new federal rules.

The boards of both Pfizer and Allergan voted yesterday to approve the transaction, according to a report from The Wall Street Journal. The $150 billion merger is considered to be historic, creating the world’s largest drug manufacturer and the largest inversion ever.

It’s not the first time that Pfizer has tried to negotiate a takeover of an offshore pharmaceutical firm. Last year, it made an unsuccessful attempt to acquire the British drug maker AstraZeneca, according to the Journal. Allergan is, itself, the product of a tax-reducing inversion transaction.

Liav Abraham, an analyst with Citigroup, told the Times that the Obama administration cannot stop inversions on its own and will need Congress to adopt new legislation, something that’s not likely to happen with Republicans in charge.

“Treasury cannot stop inversions without the implementation of new legislation by Congress, which we view as unlikely over the near term,” Abraham said.

Treasury officials seem to concur with that view, according to the Times. Indeed, some lawmakers—Orrin Hatch (R-Utah) and Sander Levin (D-Michigan) among them—have called for such legislation to be quickly put forward. The urgency, as they saw it, was the pending Pfizer deal. Now that that deal has reportedly been finalized, the question remains as to whether such future legislation would be legally binding to the takeover.

-Danny Biederman, Noel Brinkerhoff

To Learn More:

Pfizer, Allergan Agree on Historic Merger Deal (by Jonathon D. Rockoff and Dana Mattioli, Wall Street Journal)

Treasury and I.R.S. Propose Rules to Curb Corporate Relocations for Tax Reasons (by Liz Moyer and Michael J. de la Merced, New York Times)

Pfizer, Chiquita and Medtronic Try to Merge with Foreign Firms to Avoid U.S. Taxes (by Noel Brinkerhoff and Steve Straehley, AllGov)

Quick Fix Could Net California a Quarter Billion Dollars Lost to Offshore Tax Dodges (by Ken Broder, AllGov California)

Big U.S. Corporations Moving Jobs out of United States (by Noel Brinkerhoff, AllGov)