Did Barack Obama just crack down on tax inversions, or what?

The recent spate of tax inversions—US companies merging with a foreign firm, then moving their headquarters overseas to avoid American taxes—has the Obama administration worked up about the eroding US tax base. After giving up on all hope that Congress will act expeditiously, the Treasury department has changed the way it interprets tax law in an attempt to unilaterally “make inversions substantially less economically appealing,” in the technocratic language of Treasury Secretary Jack Lew.

What’s the play here? There are two key provisions:

• Foreign companies need to own more… sort of. The simplest way to crack down on tax-only inversions is make sure that foreign citizens actually own a majority of the company. Only Congress can do that, however, so Treasury is left tightening down on the existing rule—right now, companies can invert if foreign stockholders own more than 20% of the company. But now the US government is making it harder by not counting “passive assets” like cash or securities in the company’s value. They also won’t allow big dividends before an inversion to shrink the firm, or so-callled “spinversions,” taking a foreign subsidiary public to switch tax jurisdictions.
• If you invert, you can’t get at your cash so easily. The point of an inversion is to have your cake and eat it too—obtain a foreign tax rate but also freely use foreign cash you’ve moved abroad to avoid US taxes before the inversion. But the loopholes that make this possible are now being tightened: Inverted companies won’t be able to make interest-free loans back to their US subsidiaries with foreign cash, or use certain restructuring techniques to move un-taxed cash stockpiles to the new foreign holding company.

Both these provisions make inversions harder, but they won’t block them, as Treasury concedes. It’s not even clear that the provisions will stopped the inversions that have been in the news this year but have yet to close, like Medtronic $MDT and Chiquita to Ireland, AbbVie to England, Burger King to Canada; the companies say they are examining the new rules. Deals that have closed are in the clear: The rules are explicitly not retroactive, which Republicans warned would galvanize their opposition.

This decision, while it will tilt the scale against inversions and may be the best the executive branch can do alone, isn’t an iron curtain.

The two provisions regarded as most powerful when it comes to blocking inversions—raising the amount of required foreign ownership, and judging the companies’ tax jurisdiction by where its management actually works—can only be done if legislators change the law. Then there’s the fact that congressional gridlock around tax reform created the massive stockpiles of overseas cash that make tax inversions so tempting. That cash will only stop flowing overseas, through inversions or plain old profit-shifting, when Congress decides to do something about it.