The Treasury Department and Internal Revenue Service released late Thursday further measures to rein in corporate tax inversions that allow companies to move their tax residence overseas to avoid paying U.S. taxes.

Treasury Secretary Jack Lew said the notice released Thursday adds to the “targeted action” Treasury took last year, which made it more difficult for companies to “undertake an inversion and reduce the economic benefits of doing so.” Lew said last year’s action “made a real difference by reducing some of the economic benefits of inversions, resulting in a decline in the pace of these transactions.”

However, he said, while Treasury intends to take additional action in the coming months, only legislation “can decisively stop” inversions.

The Thursday notice makes it more difficult for U.S. companies to invert by:

–Limiting the ability of U.S. companies to combine with foreign entities using a new foreign parent located in a “third country”;

–Limiting the ability of U.S. companies to inflate the new foreign parent corporation’s size and therefore avoid the 80% ownership rule, and

–Requiring the new foreign parent to be a tax resident of the country where the foreign parent is created or organized to satisfy the business activities exception.

The notice also reduces the tax benefits of inversions by limiting the ability of an inverted company to transfer its foreign operations to the new foreign parent after an inversion transaction without paying current U.S. tax.

“These actions further reduce the benefits of an inversion and make these transactions even more difficult to achieve,” Lew said. “This is an important step, but it is not the end of our work.”

Treasury and IRS are exploring additional measures, Lew said, “including potential guidance on earnings stripping — and we intend to take further action in the coming months.”

Earnings stripping is a method of avoiding taxes by paying excessive amounts of interest to another party.

Lew stated that while the administration has been working with Congress for several years to find ways to limit inversions, “it is Treasury’s responsibility to protect the U.S. tax base,” and “we have repeatedly stated that we will use all of our existing administrative authority to address inversions.” Senate Finance Committee Ranking Member Ron Wyden, D-Ore., said after the notice was released that while he “welcomed” efforts by Treasury to curb overseas tax inversions, “ultimately it’s up to Congress to deliver tax policy that better equips companies to compete and succeed by staying in the U.S. And the only way to get that done, and end the inversion virus that is plaguing our country, is through true bipartisan tax reform.”

Wyden noted that inversions “are a red flag on the urgent need for tax reform.”

Senate Finance Chairman Orrin Hatch, R-Utah, stated that Treasury’s notice “only further demonstrates the critical need to update our outdated tax laws and create an economic landscape that not only retains the best and brightest businesses in the world, but also encourages investment here at home.”

The administration’s approach to reining in inversions, “must be carefully scrutinized,” Hatch continued, “and, in my view, any permanent solution to combatting inversions should be legislated by Congress.”

— Related on ThinkAdvisor: