(Bloomberg) The Obama administration can make tax inversions less economically attractive to U.S. corporations and deter companies from changing their addresses, Treasury Secretary Jacob J. Lew said.

Lew said a “broken” tax system is what prompts U.S. companies to reduce taxes by moving their addresses abroad. He reiterated yesterday that the administration will decide on possible action in the “very near future” to limit inversions.

“If Congress doesn’t act, we have to take the steps we can, which will reduce the economic value of inversions,” he said in an interview with Bloomberg Television at the Treasury Department in Washington. “It will not take away the need for legislation. But it will take a lot of the value out of these inversions, which I hope will change the decisions companies make.”

Lew’s comments went beyond a speech Sept. 8 in which he said Treasury is exploring its legal authority to act without Congress. The comments were the strongest yet in which he affirmed Treasury’s authority to limit inversions, which he had played down in July.

Lawmakers, who returned to Washington for several weeks before they will break to campaign for November’s election, haven’t shown much interest in moving bipartisan legislation to curtail inversions. Most Republicans say the issue should be addressed as part of a broader revamp of the U.S. tax code.

‘Dug In’
“I’m not sure anything receives bipartisan support because the Republicans have dug in their heels,” Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, told reporters yesterday. “They’re kind of in cement—and it’s Tea Party cement.”

Lew gave no further hints on when Treasury might take action.

The trend of corporate inversions has escalated this year. Businesses including Medtronic Inc. and AbbVie Inc. are seeking foreign addresses through mergers, though their executives and operations are changing little if at all.

Lew’s options include regulatory changes that would curb earnings stripping, the post-inversion practice that companies use to reduce taxes on U.S. income. Treasury also could limit U.S. companies from using their stockpiled foreign earnings to finance inversions without federal tax consequences.

Pending Deals
Investors are watching Treasury’s actions closely, because the changes have the potential to penalize or unravel some of the pending inversion deals.

“The real answer is tax reform, because as long as we have a system where the United States has the highest statutory tax rate in the developed world, even though a lot of companies pay no taxes, it creates a very bad incentive,” Lew said.

The U.S. corporate income tax rate is 35 percent. The congressional Joint Committee on Taxation has estimated that a bill to curb inversions would raise about $20 billion over the next decade.

A proposal by U.S. Senator Charles Schumer, a New York Democrat, would limit future deductions for all companies that moved tax addresses out of the U.S.

Schumer’s plan would reduce the amount of deductible interest for companies that invert to 25 percent of U.S. taxable income from 50 percent, according to a draft obtained by Bloomberg News on Sept. 7. Unlike the draft bill that reached back to 1994, the final version would apply to companies that inverted at any date, said a Schumer aide who sought anonymity to describe the proposal.

‘Temporarily’ Halt
Schumer said on CNBC today that he is proposing, in a compromise, that inversions be “temporarily” stopped until 2017 to prod Congress into enacting a full tax-code revamp.

He said it would “put huge pressure on Congress” to revise the code.

“We want to compromise and get this done,” he said.

Without identifying the lawmakers, Lew said he had talked with senior Republicans in Congress this week about revamping the tax code. The Treasury secretary has emphasized areas of agreement between the administration and Republicans on changes to corporate tax law even as the parties disagree on issues such as taxation of foreign income and how much high-income Americans should pay.

Working ‘Assiduously’
Senator Orrin Hatch, a Utah Republican, told reporters in Washington yesterday that his staff is working “assiduously” on inversions with aides to Ron Wyden, the Oregon Democrat who heads the Senate Finance Committee, “so that hopefully we’ll have a bipartisan approach.”

That process probably won’t move quickly enough to yield a law this month. Hatch has set out several conditions for any stopgap measure he would support, namely that it wouldn’t be retroactive and that it would be revenue-neutral for the government.

Hatch, the committee’s top Republican, spoke with Lew Sept. 8 about inversions and revamping the corporate tax code.

Wyden told reporters yesterday he was “encouraged” by the collaboration with Hatch on inversions, and he said he talked with Lew.

Lew and Transportation Secretary Anthony Foxx spoke to Bloomberg Television on the sidelines of an infrastructure investment conference the two government agencies held at the Treasury yesterday. The meeting included investors intending to spend more than $50 billion in U.S. infrastructure, Foxx said.

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