S 2976119th CongressIn Committee

HIRE Act

Introduced: Oct 6, 2025

Sponsor: Sen. Moreno, Bernie [R-OH] (R-Ohio)

Economy & Taxes

Standard Summary

Comprehensive overview in 1-2 paragraphs

This bill, introduced as the Halting International Relocation of Employment Act (HIRE Act), would impose a new 25% excise tax on outsourcing payments. Specifically, United States persons would owe the tax on payments to foreign persons for labor or services that are directed to U.S. consumers. The tax would apply to most outsourcing payments beginning after December 31, 2025, and would be accompanied by regulations to prevent avoidance (including via related parties and transfer pricing). In addition to the tax, the bill would deny a deduction for outsourcing payments, require reporting and potentially officer certification of such payments, and increase penalties for failure to pay. Revenue from the tax would be deposited into a new Domestic Workforce Fund to support workforce development, retraining, apprenticeships, and state-level job-displacement initiatives. The bill also clarifies several administrative steps, including treatment of returns as information returns and potential penalties, and asserts that the economic substance doctrine remains applicable.

Key Points

125% outsourcing tax: Imposes a tax on any outsourcing payment by a U.S. person to a foreign person for labor or services directed to U.S. consumers, with a mechanism to limit the tax on mixed US/foreign-directed payments.
2Defined terms and scope: An “outsourcing payment” covers premiums, fees, royalties, service charges, etc., payable in the course of business to a foreign person, with benefits aimed at U.S. consumers. Mixed payments are prorated based on the share of labor/services directed to U.S. consumers.
3Non-deductibility: No deduction may be taken for outsourcing payments (Sec. 280I), effective for payments after December 31, 2025.
4Domestic Workforce Fund: Establishes a Treasury trust fund funded by the outsourcing tax and related penalties; proceeds are dedicated to workforce development, retraining, apprenticeships, and state grants in areas impacted by outsourcing.
5Reporting and enforcement: Requires information returns or tax returns related to outsourcing payments, possible officer certifications under penalty of perjury, enhanced penalties for failure to pay (including a substantial increase in the late-payment penalty), and regulations to prevent abuse and transfer pricing manipulation.

Impact Areas

Primary group/area affected- United States taxpayers and businesses that make outsourcing payments to foreign service providers for work directed to U.S. consumers. These entities would face a 25% excise tax on eligible payments and lose the deduction for such payments.Secondary group/area affected- Foreign persons receiving outsourcing payments (excludes certain corporate or partnership entities organized in U.S. possessions from the definition of “foreign person,” which could affect which vendors are taxed).- U.S. Treasury and funding programs focused on domestic workforce development, as the new Fund would channel revenue into retraining, apprenticeships, and state workforce initiatives.Additional impacts- Potential changes in commercial contracting, pricing, and supply chains due to higher after-tax costs of outsourcing to foreign providers.- Increased administrative/compliance burden for businesses, including new reporting and potential officer certifications.- Possible influence on transfer pricing scrutiny and related-party arrangements due to stricter anti-avoidance guidance.Foreign person: generally someone not a U.S. person, with an exception for corporations/partnerships organized under U.S. possession laws (so some entities in U.S. possessions may not be subject to the tax).Effective date: the new provisions apply to payments made after December 31, 2025.Preservation of substance doctrine: the bill explicitly states it does not limit the economic substance doctrine’s application to these payments.

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