Update—Wednesday, 10am EDT:U.S. pharmaceutical giant Pfizer Inc. and Ireland-based Allergan announced Wednesday morning that they are scrapping the proposed $160 billion merger that would have allowed Pfizer to dodge millions in U.S. taxes.According to Reuters, \u0022Pfizer said the decision was driven by new U.S. Treasury rules aimed at curbing such deals, called inversions.\u0022Democratic presidential hopeful Bernie Sanders, who had called for the Treasury Department to crack down on such tax-evasion practices, heralded the news on Twitter:Treasury’s new rules have put profitable corporations on notice that their greed will not be allowed to continue. https://t.co/5Q5o8WaLk4— Bernie Sanders (@SenSanders) April 5, 2016Earlier...Issuing what some called a death blow to the proposed $160 billion merger between pharmaceutical giants Pfizer and Allergan, the U.S. Treasury Department late Monday proposed new tax regulations aimed at cracking down on so-called corporate inversions. Corporate inversions allow U.S. businesses to avoid paying U.S. taxes by claiming foreign citizenship. The merger between Viagra-maker Pfizer Inc. and Allergan PLC, which manufactures Botox, would have been \u0022the largest inversion ever,\u0022 according to the Wall Street Journal, allowing Pfizer to profit from a lower corporate tax rate in Allergan\u0026#039;s home country of Ireland.\u0022If our analysis is correct, this is a major victory for taxpayers who pay their fair share and who should expect no less from one of America’s biggest and most profitable corporations.\u0022—Frank Clemente, Americans for Tax FairnessBut the rules proposed Monday by the Treasury Department \u0022would negate the benefits of these inversions, putting Pfizer\u0026#039;s acquisition of Allergan at risk,\u0022 Reuters reported. Indeed, the watchdog group Americans for Tax Fairness agreed, \u0022it appears that the Treasury Department has issued a rule with respect to serial inverters, such as Allergan, that will wipe out the expected tax breaks Pfizer was counting on.\u0022\u0022If our analysis is correct, this is a major victory for taxpayers who pay their fair share and who should expect no less from one of America’s biggest and most profitable corporations,\u0022 said the group\u0026#039;s executive director, Frank Clemente.As the Wall Street Journal explains, the new regulations seek to \u0022make it harder for companies to make the arithmetic on inversions add up,\u0022 while also hampering \u0022the post-inversion maneuvers companies can use to lower their U.S. taxes.\u0022To do so, the Journal explains:First, they go after what they call “serial inverters,” companies that have engaged in multiple inversion transactions. The rules would disregard three years of past mergers with U.S. corporations in determining the size of the foreign company. By subtracting the value of U.S. assets a foreign company had acquired, the foreign company would become smaller in relation to the U.S. company.Additionally, the Journal reports:The government issued regulations against what’s known as earnings stripping, a kind of transaction that typically occurs after an inversion. Companies can lend money from their foreign headquarters to what is now the U.S. subsidiary in a transaction that has no effect on the consolidated company’s books. But it matters for tax purposes, because the U.S. subsidiary gets interest deductions against the world-high 35% U.S. corporate tax rate, effectively pushing income to a country with a lower tax rate. The rules would give the government more authority to treat those debt transactions as equity movements under the tax code.Less than three weeks ago, presidential hopeful and U.S. Sen. Bernie Sanders decried deals such as the Pfizer-Allergan merger as \u0022nothing less than a tax scam,\u0022 and called on Treasury Sec. Jack Lew to crack down on earnings stripping as well as other tax-dodging practices.On Tuesday, advocacy organization Citizens for Tax Justice (CTJ) noted \u0022growing public outrage over lax tax laws\u0022 and said the \u0022new regulations partly address that by reducing the tax payoff from convoluted transaction known as \u0026#039;earnings stripping.\u0026#039;\u0022\u0022While the regulations may not stop the pending Pfizer inversion, they may put a damper on the company\u0026#039;s assumed plans to avoid taxes on $40 billion in untaxed profits that it has shifted into tax havens,\u0022 said CTJ director Robert S. McIntyre.\u0022But the Treasury Department can and should take further action,\u0022 McIntyre continued. \u0022For example, it should use its authority [pdf] to further limit the ability of expatriating companies to use \u0026#039;hopscotch loans\u0026#039; to get around the current, weak curbs on inversions.\u0022\u0022Sadly, rather than pass more targeted fixes to corporate inversion, a Republican-led Congress has decided to sit on its hands as multinational corporations avoid more and more taxes, eroding the corporate tax base, and shifting the burden of taxation onto domestic companies and American workers.\u0022—Hunter Blair, Economic Policy InstituteStill, to really rein in corporate tax dodgers will require action by Congress.\u0022The Treasury’s regulatory actions continue to provide temporary fixes, which will help reduce the short-term erosion of the U.S. corporate tax base,\u0022 Economic Policy Institute analyst Hunter Blair wrote in a blog post Tuesday. \u0022But regulatory authority can only go so far, and legislative action is necessary to fully stop this type of corporate tax evasion.\u0022As Lew himself said Monday on a conference call with reporters: \u0022Only new anti-inversion legislation can stop these transactions. Until that time, creative accountants and lawyers will continue to seek new ways for companies to move their tax residences overseas and avoid paying taxes here at home.\u0022However, Blair said, \u0022Sadly, rather than pass more targeted fixes to corporate inversion, a Republican-led Congress has decided to sit on its hands as multinational corporations avoid more and more taxes, eroding the corporate tax base, and shifting the burden of taxation onto domestic companies and American workers.\u0022CTJ\u0026#039;s McIntyre concurred. \u0022Even if Treasury further cracks down on U.S. companies that claim foreign residency for tax purposes, congressional action remains necessary to put a full stop to corporation inversions,\u0022 he said. \u0022Congressional leaders should stop coddling corporate deserters and enact anti-inversion reforms such as the Stop Corporate Inversions Act.\u0022That legislation, CTJ explained in a blog post last month, would no longer allow a newly merged company to claim to be foreign if it continues to be managed and controlled in the United States or if the new parent company is more than 50 percent owned by the shareholders of the original American company.