(Bloomberg) The U.S. Treasury Department is examining whether it has the authority to bypass Congress and curb corporate inversions, reversing the administration’s prior insistence that it lacked power to act.

“Treasury is reviewing a broad range of authorities for possible administrative actions that could limit the ability of companies to engage in inversions,” the department said in a statement today.

Treasury said it also was considering “approaches that could meaningfully reduce the tax benefits after inversions take place, to at least provide a partial fix.”

The administration didn’t say when any changes would be announced or what they might be.

The statement puts companies on notice for possible administrative actions and alters the prospects for at least eight U.S. companies with pending inversions and dozens of others that have already carried out inversions.

In such transactions, a company moves its legal address outside the U.S. to lower its tax bills, often by buying a smaller company.

Treasury Secretary Jacob J. Lew told the New York Times today that officials are assembling a “very long list” of options to “change the economics of inversions” and that no final decisions have been made.

“If we have to wait for what is the likely period of time before business tax reform can be enacted,” Lew told the newspaper, “I think we’re all going to regret the number of inversions that have occurred in the interim.”

Potential legal changes to address inversions come in two broad categories. One would involve creating higher barriers to prevent companies from changing their legal addresses through mergers.

The other would limit inverted companies from accessing accumulated foreign profits and strip taxable income from their U.S. operations by loading the U.S. subsidiary with deductions for interest and other items.

Former Treasury official Stephen Shay urged the administration to consider the second type of change in a Tax Notes article last month.

Companies including Mylan Inc., Medtronic Inc. and AbbVie Inc. have pending transactions that would move their addresses outside the U.S.

Nina Devlin, a spokeswoman for Canonsburg, Pennsylvania-based Mylan, said today she had no comment.

Eaton and Ingersoll-Rand
Companies such as Eaton Plc and Ingersoll-Rand Plc that inverted before this year could be affected by limits on inverted companies’ ability to issue debt in the U.S.

Obama administration officials, including Lew, have previously insisted that Congress must authorize changes to the law to limit inversions.

“We do not believe we have the authority to address this inversion question through administrative action,” Lew said July 16. “If we did, we would be doing more.”

Congress has deadlocked on the issue and is on a break from Washington until September. In this election year, action looks unlikely, leaving the administration with a choice: press the political issue by pointing to inaction in Congress or attempt to address the problem by itself.

Democrats want retroactive limits to prevent U.S. companies from getting a foreign address by buying a smaller business. Republicans generally want to address the issue through a broader tax-code revamp that won’t occur until 2015 at the earliest.

Levin and Schumer
Democrats including Representative Sander Levin of Michigan and Senator Charles Schumer of New York have been writing legislation that would address companies’ ability to strip taxable income from a U.S. subsidiary.

“If Treasury has the authority to tackle inversions, by all means they ought to use it,” Schumer, the chamber’s third-ranking Democrat, said in an e-mailed statement. “But we also need legislation to take on inversions to ensure that whatever Treasury is able to do can’t be undone by a future administration.”

A spokeswoman for AbbVie, which has announced though hasn’t completed a tax-inversion deal, didn’t immediately return a call and e-mail seeking comment.

Walgreen Co., the biggest U.S. drugstore chain, plans to say it will buy all of Nottingham, U.K.-based Alliance Boots Holdings Ltd. and won’t use the deal to move its tax address abroad, said a person familiar with the matter.

Treasury Authority
Shay, the former top international tax official at Treasury under Obama, has contended that Treasury does in fact have authority that it’s not using to make the deals less attractive.

In the Tax Notes article, Shay said the administration could limit inverted companies’ interest deductions against U.S. income or their ability to gain access to foreign cash without paying U.S. taxes.

Unlike the legislation backed by President Barack Obama, those changes wouldn’t prevent inversions. Instead, they would make the transactions less attractive.

Joshua Earnest, the White House press secretary, said today that the administration hasn’t ruled in or ruled out administrative action.

—With assistance from Lisa Lerer in Washington and Drew Armstrong and Cynthia Koons in New York.

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