American drug company Pfizer is the latest company that wants to "move" to Europe for lower taxes.
The Obama administration is trying to stop it, but the White House says it can only do so much without Congress taking action.
Pfizer (PFE) is in the courtship phase to tie the knot with the Irish drugmaker Allergan (AGN) for a reported $150 billion.
It would be the second-largest merger of all time, according to Dealogic. Only the 1999 deal uniting Germany's Mannesmann and Britain's Vodafone is bigger.
Allergan is best known as the maker of Botox. Pfizer is no doubt interested in owning Botox and other drugs that Allergan currently makes. But another big allure is to reduce Pfizer's U.S. taxes if the new company is headquartered in Ireland.
To get a sense of just how lucrative that could be, the deal could value Allergan at up to $380 a share. That's substantially higher than Allergan's stock price of around $300 a share from a week ago.
The White House fights back with new rules
The Treasury Department unveiled new rules Thursday to make it harder for companies to avoid some American taxes by doing these deals.
"It's Treasury's responsibility to protect the U.S. tax base," said Treasury Secretary Jack Lew. But he added there is only so much the White House can do without action from Congress.
Pfizer has been openly critical of high U.S. corporate taxes.
Last year, Pfizer aggressively pursued the acquisition of British pharmaceuticals rival AstraZeneca.
Though the deal finally didn't go through, Pfizer execs didn't hide the fact that tax savings were one of the main drivers of that merger. A Pfizer-AstraZeneca combination was expected to be domiciled for tax purposes in the U.K.
Pfizer's finance chief Frank D'Amelio said the company paid a consolidated U.S. tax rate of between 27% and 30% in recent years.
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Pfizer-Allergan merger likely to go ahead
It's unlikely the latest rules from the Treasury Department will stop the Pfizer-Allergan merger.
The practice is still legal. It has been dubbed "inversion" because bigger American companies buy smaller foreign ones and then switch their headquarters (at least on paper) to the location of the smaller company. Burger King made headlines last year when it bought Canadian doughnut chain Tim Hortons and moved its address to Canada.
At the moment, foreign shareholders have to own at least 20% of the combined company in order to move its headquarters out of the U.S. for tax purposes. Sometimes mergers try to inflate the value of the foreign company in order to meet the 20% requirement, but the Pfizer-Allergan deal should be able to meet that threshold without any financial tinkering.
Republicans and Democrats speak out
One of the most vocal critics of companies leaving the U.S. to lower their tax bills is hedge fund billionaire Carl Icahn. He has pledged $150 million to start a political PAC to pressure Congress to take action.
Icahn has called inversions "an absurdity" and "something out of Alice in Wonderland."
It might signal some growing bipartisan support for action.
Presidential candidate Donald Trump is a good friend of Carl Icahn's. Trump has repeatedly mentioned Icahn as a possible Treasury Secretary candidate.
"Inversions are a red flag on the urgent need for tax reform. If we want to protect the economic strength of the U.S. and create jobs, this must be a top priority for all lawmakers in the year ahead," said Senator Ron Wyden, an Oregon Democrat and member of the Senate Finance Committee, in a statement.
