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Law360, Washington (October 13, 2016, 7:54 PM EDT) — The U.S. Treasury Department issued its final debt-to-equity rules Thursday, with changes to exempt certain kinds of corporations, employee stock plans and others from regulations meant to curb the tax benefits of corporate inversions.

A Treasury statement said the final rules would “balance the operational needs of companies while preventing the erosion of our U.S. corporate tax base,” by exempting foreign subsidiaries of multinationals, S-corporations, mutual funds, real estate investment trusts and transactions between banks from a regime that would allow the IRS to treat transactions as part debt and part equity when calculating taxes, rather than wholly one or the other.

Floated as part of a larger plan to curb corporate inversions overseas earlier this year under Section 385 of the Internal Revenue Code, the original version caught flak for its sweeping nature and unintended consequences for wholly domestic transactions. The final rules also move back the compliance date to 2018 and allow the relevant documents to be filed along with a corporation’s tax return. The changes were made, according to the department, in order to accommodate suggestions and avoid problems in normal-course-of-business transactions.

“These purported debt instruments do not finance any new investment in the operations of the borrower and therefore have the potential to create significant federal tax benefits, including interest deductions that erode the U.S. tax base, without having meaningful non-tax significance,” the department’s new rules said.

In addition to the exemptions for the banking industry and certain kinds of corporations, all taxpayers will be able to exempt $50 million in debt from recharacterization under the final rules. The department estimated that the final rules could affect some 6,300 companies, and require $224 million in total startup costs for compliance and $56 million annual compliance costs. On the other side of the ledger, the rules could allow the IRS to take in another $461 million to $600 million in annual revenue.

Shortly after the rules’ release Sen. Orrin Hatch, R-Utah, blasted the administration for “completing rules that could jeopardize American businesses and the economy here at home.” He said the rule falls into a larger pattern of President Barack Obama’s administrative agencies creating new rules out of whole cloth without consulting Congress.

The U.S. Chamber of Commerce issued a statement expressing doubts about the rule — the group has already launched a challenge contending that a different rulemaking in the broader anti-inversion push went beyond its statutory authority — saying the agency appears to have addressed some of its concerns.

“We continue to believe punitive, one-off changes to the tax law do nothing to address the root of the purported ‘inversion problem’: our antiquated and anticompetitive tax code,” the group said. “If we are seeking to make the United States a competitive place to do business, we need to focus on achieving comprehensive tax reform.”

Critics have included business and trade groups, as well as both Democrats and Republicans, who’ve called out the proposal as overly broad and beyond the Treasury Department’s authority, while also contending it’s been rushed through without proper consideration for public comments.

Just one day after the Treasury Department announced the anti-inversion package, the U.S. pharmaceutical giant Pfizer Inc. and its Irish rival Allergan PLC called off their intended $160 billion merger, saying their decision was “driven by the actions announced by the U.S. Department of Treasury.”

The agency pushed back on criticism that the rules went beyond its authority with the revisions issued Thursday, saying that the Treasury secretary has the authority to issue tax rules that address such particular situations without applying more broadly. Those final rules, according to the agency, take into account several thousand comments and input from industry.

“The Treasury Department and the IRS carefully considered those comments in revising the proposed rules to significantly reduce compliance burdens and in developing the regulatory impact analysis of costs and benefits that accompanies and supports the final and temporary regulations.” it said.

Furthermore, he agency said, the law does not require the Treasury Department to keep within the “four corners” of a transaction — the parties involved, funds exchanged and terms they operate under. The final rules allow it to take into analysis the surrounding context of a transaction, which carries over from the common law understandings of debt and equity, the agency said.

It also noted that there is an element of urgency to issuing the final rules, as the three-year lookback period under the current formulation would capture debt instruments issued this year.

–Additional reporting by Vidya Kauri and Bryan Koenig. Editing by Brian Baresch.

Correction: an earlier the story misidentified the rule the U.S. Chamber of Commerce challenged.