The U.S. Department of the Treasury has come out with temporary regulations which will make it more difficult for companies to go for tax inversion deals. Tax inversion deals were very popular a couple of years back as they involved the creation of a more efficient tax structure. Typically, such deals see U.S.-based companies pursuing transactions that will allow them to change their tax residence with the goal of reducing or avoiding paying U.S. taxes. This involves acquiring a smaller foreign company and the subsequent re-location of the tax residence of the merged group outside the U.S., usually in a low-tax country. In the healthcare sector alone, such deals were announced by companies like Mylan MYL, Salix, and Actavis among others. But then the Treasury came out with guidance (in Sep 2014 and Nov 2015) aimed at reducing the economic benefits of such transactions leading to a slowdown in this area. And the Treasury has now come up with additional guidance making it all the more difficult for companies to invert. Some of the latest rules will impact tax benefits enjoyed by serial inverters, i.e. companies that acquire several U.S. firms in stock-based transactions over a short period of time thereby increasing their size and reducing the negative tax consequences of a subsequent inversion. The Treasury is also taking action against earnings-stripping by focusing on transactions that generate large interest deductions by transferring debt between subsidiaries without financing new investment in the U.S. With the new guidance being issued, the immediate question that arises is whether Pfizer, Inc. PFE will go ahead with its plans to combine with Botox-maker Allergan plc AGN in a deal valued at approximately $160 billion. Pfizer had announced its agreement with Allergan in Nov 2015 and had said that once the deal goes through (in the second half of 2016) it will be renamed “Pfizer plc” with global operational headquarters in New York while Allergan’s Irish legal domicile will be maintained. Pfizer had stated that the adjusted effective tax rate is expected to be approximately 17%-18% by the first full year after the closing of the transaction. Pfizer issued a statement saying that it is reviewing the Treasury’s actions. However, Allergan’s shares were down more than 20% in pre-market trading reflecting concern that the new laws may lead to the deal being cancelled. Both Allergan and Pfizer are Zacks Rank #3 (Hold) stocks. Eli Lilly and Company LLY is a better-ranked stock with a Zacks Rank #2 (Buy). Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PFIZER INC (PFE): Free Stock Analysis Report LILLY ELI & CO (LLY): Free Stock Analysis Report ALLERGAN PLC (AGN): Free Stock Analysis Report MYLAN NV (MYL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research