Inversions have largely been thought to reduce federal revenue, sometimes drawing the denunciation of "unpatriotic." The Pfizer and Allergan deal would be the largest of its kind, but the Treasury isn't readily signing off on what it views as tax-avoiding corporate maneuvering, despite such deals becoming more popular in the pharmaceutical industry.

Treasury Secretary Jack Lew told CNN: "Many of these companies continue to take advantage of the benefits of being based in the United States — including our rule of law, skilled workforce, infrastructure, and research and development capabilities — all while shifting a greater tax burden to other businesses and American families."

This isn't the first time Pfizer has looked abroad to escape the U.S. corporate tax system. In 2014, it unsuccessfully went after British company AstraZeneca, making it clear that tax savings was a main impetus behind the move.

For the Obama administration, this is the third instance it has intervened and tried to limit inversions. Obama has repeatedly called for action on the matter, but lawmakers have done little. Earlier this week, he continued his appeal to Republican-controlled Congress and said he welcomed the Treasury's inquiry, reported Reuters. Both party frontrunners for president, Donald Trump and Hillary Clinton, have also harped on the issue during their campaigns.

Pfizer and Allergan issued a joint statement saying they are "conducting a review of the U.S. Department of Treasury's actions," and they "won't speculate on any potential impact."