HIRE Act
- Sponsor
- Sen. Moreno, Bernie [R-OH]
- Committees
- Finance Committee (primary)
- Last action
- Oct 6, 2025
Bottom line
The bill aims to discourage the outsourcing of labor and services by U.S. businesses to foreign entities through a new excise tax and a denial of tax deductions, while simultaneously funding domestic workforce initiatives.
What it actually does
This bill imposes a new 25% excise tax on United States persons making payments to foreign entities for services that benefit U.S. consumers, effectively targeting outsourced labor. It also explicitly denies an income tax deduction for these outsourcing payments and establishes a dedicated 'Domestic Workforce Fund' to receive the tax revenues, which will then be used for workforce development and retraining programs.
Proponents argue
Supporters argue the bill will incentivize U.S. companies to keep jobs domestically, protect American workers from job displacement due to outsourcing, and create a dedicated funding stream for retraining and workforce development programs, ultimately strengthening the U.S. economy and labor market.
Opponents contend
Opponents might argue that the tax would increase costs for U.S. businesses, potentially leading to higher prices for consumers or reduced competitiveness in global markets. They may also contend it could complicate international trade relations and be difficult to administer effectively, potentially harming businesses that rely on global supply chains or specialized foreign services.
The bill is concise, allowing for a quick read, but its implications for tax law and international business are complex and warrant careful consideration beyond a superficial review.
Section 2(a), new Chapter 50B, Section 5000E(a) of the IRC
Imposition of 25% Excise Tax on Outsourcing Payments
This provision establishes a new 25% excise tax on any United States person who makes an 'outsourcing payment.' The tax is calculated as 25 percent of the amount of such payment, directly increasing the cost of engaging foreign persons for services benefiting U.S. consumers.
Supporters argue
Proponents argue this tax directly disincentivizes outsourcing, making domestic labor more competitive and encouraging U.S. companies to retain or create jobs within the United States.
Critics contend
Opponents contend that this tax will significantly raise operating costs for U.S. businesses, potentially leading to higher prices for consumers or reduced profitability, rather than necessarily bringing jobs back.
Tradeoffs
The provision balances the goal of domestic job retention against the potential for increased business costs and consumer prices, and the impact on global supply chains.
Section 2(a), new Section 5000E(b) of the IRC
Definition of 'Outsourcing Payment'
This section defines an 'outsourcing payment' as any premium, fee, royalty, service charge, or other payment made in the course of a trade or business to a foreign person for labor or services whose benefit is directed, directly or indirectly, to consumers in the United States. It also provides rules for 'mixed payments,' where services benefit consumers both within and outside the U.S., requiring apportionment of the payment.
Section 2(b), amending Section 275(a)(6) of the IRC
Denial of Deduction for Outsourcing Excise Tax
This amendment specifies that the new excise tax imposed under Chapter 50B (the outsourcing tax) cannot be deducted from income for federal income tax purposes. This means businesses cannot reduce their taxable income by the amount of the excise tax paid, making the tax a full additional cost.
Section 2(c) and (d)
Enhanced Reporting Requirements and Increased Penalties
This section authorizes the Secretary of the Treasury to require U.S. persons to file returns or information returns regarding payments to foreign persons, including details on whether these are outsourcing payments, with officers potentially certifying under penalty of perjury. It also significantly increases the penalty for failure to pay the outsourcing tax, substituting '50 percent' for '0.5 percent' and removing the 25 percent aggregate cap, making non-compliance much more costly.
Section 3(a), new Section 9512 of the IRC
Establishment of the Domestic Workforce Fund
This provision establishes a new trust fund in the Treasury of the United States, to be known as the 'Domestic Workforce Fund.' Amounts equivalent to the revenue generated from the new outsourcing excise tax, related additions to tax, and penalties are appropriated to this fund, creating a dedicated revenue stream.
Section 3(c)
Permitted Expenditures from the Domestic Workforce Fund
This section specifies that amounts in the Domestic Workforce Fund shall be available, without further appropriation, solely for three purposes: workforce development and retraining programs administered by the Department of Labor, apprenticeship programs and partnerships with industry to expand domestic employment in sectors impacted by outsourcing, and grants to States for workforce development initiatives targeted at communities with high levels of job displacement.
Section 4(a), new Section 280I of the IRC
Denial of Income Tax Deduction on Outsourcing Payments
This provision explicitly states that no deduction shall be allowed under Chapter 1 of the Internal Revenue Code (which governs income taxes) for any 'outsourcing payment' as defined in the new Section 5000E(b). This reinforces the financial disincentive by preventing businesses from reducing their taxable income through these payments.
This clause states that nothing in the Act or its amendments shall be construed to limit the application of the economic substance doctrine with respect to any outsourcing payment.
Section 2(e)
Why it matters:This is standard legislative practice to clarify the interaction with existing tax principles and ensure that general anti-abuse rules remain applicable, rather than being superseded by specific new provisions. It's consequential for tax planning.
Case for: Proponents would argue it's essential to prevent sophisticated tax avoidance schemes that might try to structure payments to technically comply with the new outsourcing tax rules while lacking genuine economic substance, thereby preserving the integrity of the tax.
Case against: Opponents might argue it adds another layer of uncertainty for businesses, as the economic substance doctrine can be subjective and lead to disputes with the IRS, even for transactions that appear compliant with the letter of the law.
Estimated impact: Potentially significant for complex international transactions, ensuring the IRS retains broad anti-abuse authority to challenge arrangements designed solely to avoid the tax.
This provision grants broad authority to the Secretary of the Treasury to prescribe regulations and other guidance as necessary or appropriate to carry out the section, specifically to prevent the avoidance or abuse of the purposes of this section, including through the use of related parties, controlled foreign corporations, and other intermediaries, or through the use of transfer pricing arrangements.
Section 2(a), new Section 5000E(d) of the IRC
Why it matters:This is standard legislative practice to delegate detailed rule-making to the executive branch, as Congress cannot foresee every scenario. However, it grants significant power to the Treasury and IRS to shape the tax's practical application and enforcement.
Case for: Proponents argue this broad authority is essential for the IRS to adapt to evolving business practices and close potential loopholes that sophisticated entities might exploit to avoid the tax, ensuring its effectiveness.
Case against: Opponents might express concern that such broad regulatory authority could lead to unforeseen interpretations or overly burdensome compliance rules that go beyond the original intent of Congress, creating uncertainty for businesses.
Estimated impact: High, as the regulations issued under this authority will define the practical scope and enforcement of the tax, potentially affecting billions in transactions and shaping how businesses structure international operations.