The U.S. Treasury Department announced steps 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 that close today 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 today 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 U.S.

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.

Treasury Reversal

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.

The rules announced today seek to limit so-called spin- versions, in which U.S. companies spin off units into a foreign company. It also would restrict the use of a technique known as skinnying down, in which companies make special dividends to reduce their size before a merger to meet the current law’s requirements.

Under current law, U.S. companies that invert through a merger are still treated as domestic for tax purposes if the former U.S. company’s shareholders own less than 80 percent of the combined company. The administration wants to reduce that 80 percent number to 50 percent; that requires legislation.

Relinquish Control

Other changes announced in the rules would make it harder for inverted companies to relinquish control of their foreign subsidiaries to get them out of the U.S. tax code’s orbit. U.S. companies must pay taxes when they repatriate foreign profits.

Obama has raised the inversion issue publicly, saying that inversions were wrong and unfair.

“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.

By this month, Lew had concluded that Treasury had legal authority to make inversions less attractive.

Investors have been watching for signs of what the Treasury would do because the changes could penalize or unravel some of the pending inversion deals.

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. Another inversion involving Horizon Pharma Inc. closed on Sept. 19.

Broader Revamp

Lawmakers, who left Washington to campaign for the Nov. 4 election, haven’t shown much interest in writing bipartisan legislation to curtail inversions. Most Republicans say the issue should be addressed as part of a broader revamp of the U.S. tax code.

The U.S. corporate income tax rate is 35 percent, and the U.S. is one of few industrialized nations that imposes its corporate tax on the foreign income of companies based in the country.

Those rules—along with the ability of inverted companies to reduce U.S. taxes on their future income— have made inversions attractive to companies.

The congressional Joint Committee on Taxation has estimated that legislation to curb inversions would raise about $20 billion over the next decade.