HIRE Act
- Bill Number
- S. 2976
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-10-06: Read twice and referred to the Committee on Finance.
- Last Updated
- 2026-03-09T19:18:57Z
AI-Generated Summary
Purpose
The Halting International Relocation of Employment Act (HIRE Act) aims to discourage U.S. companies from outsourcing services to foreign providers when those services benefit American consumers. It does this by imposing taxes on such payments and redirecting the revenue to support domestic job training and workforce development programs.
Key Provisions
- Excise Tax on Outsourcing Payments: Imposes a 25% tax on payments made by U.S. persons (individuals or entities) to foreign persons (non-U.S. entities, excluding those organized in U.S. territories) for labor or services that primarily benefit U.S. consumers. This includes premiums, fees, royalties, or service charges made in the course of business.
- For mixed payments (services benefiting both U.S. and non-U.S. consumers), the tax applies only to the portion benefiting U.S. consumers, calculated as a fraction of the total payment.
- Non-Deductibility: The excise tax itself cannot be deducted from income taxes, and the underlying outsourcing payments are not deductible as business expenses.
- Reporting and Enforcement: U.S. payers must file returns or information reports detailing these payments, including certifications under penalty of perjury. The Treasury Secretary can issue regulations to prevent avoidance, such as through related parties or transfer pricing (methods to allocate costs between related entities).
- Penalties: Failure to pay the tax incurs higher penalties—up to 50% of the unpaid amount, compared to the standard 5%—without the usual cap.
- Domestic Workforce Fund: Creates a trust fund in the U.S. Treasury, funded by the new tax revenues, penalties, and related additions. Funds are used exclusively (without needing further congressional approval) for:
- Workforce development and retraining by the Department of Labor.
- Apprenticeship programs and industry partnerships to boost U.S. jobs in outsourcing-affected sectors.
- Grants to states for job displacement initiatives in impacted communities.
- Effective Date: Applies to payments made after December 31, 2025.
Significant Changes to Existing Law
- Adds a new Chapter 50B to the Internal Revenue Code (IRC) for the outsourcing excise tax, similar to existing taxes on certain transactions (e.g., heavy vehicles or medical devices).
- Amends IRC Section 275 to make the tax non-deductible and Section 280I to deny deductions for the payments themselves, increasing the effective cost of outsourcing.
- Enhances IRC reporting rules (under Chapter 68) to treat these as information returns and boosts penalties under Section 6651 for non-payment.
- Establishes a new IRC Section 9512 for the Domestic Workforce Fund, akin to other trust funds (e.g., for highways or social security), but dedicated specifically to anti-outsourcing workforce efforts.
- Explicitly preserves the "economic substance doctrine" (a rule that disallows tax benefits from transactions lacking genuine business purpose), applying it to potential avoidance schemes.
Potential Impacts
- On Government Agencies: The IRS gains new enforcement responsibilities, including anti-avoidance regulations, potentially increasing administrative workload. The Department of Labor and states receive dedicated funding for training programs, which could expand job support services. Overall, it generates revenue for the Treasury to offset outsourcing's economic effects.
- On Citizens: U.S. workers in outsourcing-vulnerable sectors (e.g., customer service, IT) may benefit from retraining and apprenticeships, potentially reducing job losses and aiding community recovery. However, higher business costs could lead to indirect effects like price increases for consumers.
- On International Relations: Could strain ties with countries reliant on U.S. outsourcing (e.g., India, Philippines), as it targets foreign providers and may prompt retaliatory trade measures. It might encourage reshoring of jobs but could complicate global supply chains.
Main Stakeholders Affected
- U.S. Businesses: Companies outsourcing services (e.g., call centers, software support) face higher costs (tax plus lost deductions), incentivizing domestic hiring but possibly raising operational expenses.
- Foreign Service Providers: Entities outside the U.S. (e.g., overseas firms) receive fewer payments due to the tax deterrent, potentially harming their revenues and economies.
- U.S. Workers and Communities: Employees displaced by outsourcing gain access to funded training and state grants, benefiting regions with high job loss rates.
- Government Entities: IRS (enforcement and reporting), Department of Labor (program administration), and state governments (grant recipients) are directly involved.
- Consumers: U.S. individuals using outsourced services (e.g., online support) may see indirect cost pass-throughs but could gain from stronger domestic job markets.
Notable Legal, Constitutional, or Political Implications
- Legal: The tax could face challenges under international tax treaties or World Trade Organization rules for discriminating against foreign entities. The broad regulatory authority given to the Treasury might lead to disputes over definitions (e.g., what counts as "benefiting U.S. consumers") or avoidance prevention.
- Constitutional: Potential questions on the Commerce Clause (Congress's power to regulate interstate and foreign commerce), as it affects cross-border transactions without directly infringing on states' rights. No clear equal protection issues, but it treats foreign and domestic providers differently.
- Political: Positions the legislation as pro-worker and anti-offshoring, appealing to domestic employment priorities, but critics may view it as protectionist, potentially escalating trade tensions. The dedicated fund ties tax policy to labor goals, influencing future budget debates on workforce spending.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Recent Actions
- 2025-10-06: Read twice and referred to the Committee on Finance.
- 2025-10-06: Introduced in Senate
Bill Versions
- Halting International Relocation of Employment Act — issued 2025-10-06 — PDF (7 pages)