The Treasury Department is once again doubling down on the bad bet that more regulation will stop U.S. firms from moving abroad. Treasury's Nov. 19 anti-inversion notice repeats the same mistakes from years past and doesn't address the underlying incentives which discourage businesses from headquartering in the United States.

This latest guidance notice from Treasury comes as Pfizer Inc. decided to combine with Allergan PLC, headquartered in Dublin, Ireland. At the conclusion of this so-called "inversion," the domestic firm Pfizer will merge with the foreign Allergan and move the new corporation's headquarters to the lower-tax Ireland. If the merger is successful, it will be the largest inversion ever to a lower-tax jurisdiction – valued at around $160 billion.

Tax inversions are perfectly legal. However, Treasury's guidance limits three mechanisms often used in inversions which are seen by some as loopholes in the current regulations. The changes add additional requirements which narrow the pool of potential inversion partners and make it harder to meet initial ownership requirements. 

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