HIRE Act Proposes 25 Percent Excise Tax on Outsourcing Payments

On September 5, 2025, Ohio Senator Bernie Moreno introduced the “Halting International Relocation of Employment Act” or “HIRE Act”.  The Hire Act proposes a 25 percent tax on payments made by U.S. companies to foreign persons for labor or services that benefit US consumers (referred to as “outsourcing payments”) and prohibits companies from deducting any outsourcing payments in determining their taxable income. If the HIRE Act becomes law, companies heavily reliant on offshore services, particularly in IT, customer support, and back-office operations, would face substantial new costs, potentially leading to higher consumer prices. 

Under the Hire Act, outsourcing payments would be punished in two ways. First, they would be denied deductibility against the income tax.  Second, they would be subject to an additional 25 percent excise tax on their gross value.  This means that a $100 outsourcing payment that currently costs about $79 after tax savings would cost $125 under the HIRE Act, a 58% jump.

U.S. businesses would be required to be pay the 25 percent excise tax on fees, royalties, or service charges paid to foreign personas if the services benefit U.S. consumers.  If services benefit both U.S. and non-U.S. consumers, the tax only applies to the U.S. portion.  A “foreign person” is defined broadly to include all non-U.S. persons, except companies or partnerships formed under U.S. territorial laws. 

Although the bill does not explicitly target India, the Indian technology sector would likely to be among the most affected industries.  However, the HIRE Act’s language is broad enough to potentially cover third-party vendors, company-owned captive centers (GCCs), and individual freelancers in any foreign country providing services that benefit U.S. consumers.  The bill also includes anti-abuse provisions to prevent rerouting of payments through US territories.  

Revenues from the outsourcing tax would be used to establish and support the “Domestic Workforce Fund,” which would provide workforce development and retraining programs, apprenticeship programs and partnerships to expand domestic employment, and grants to states for workforce development.

Senator Moreno is new to the Senate and is not a member of the tax writing committee. He attempted to bring the bill up on the Senate floor by unanimous consent on September 17 but was blocked by Democrats. It is unclear whether the bill has the potential to gain any momentum in the near term.  Although the Hire Act may never become law, it reflects a broader trend of protectionist policies in the U.S. 

Should you have any questions about the Hire Act, please contact Maureen Monaghan (mmonaghan@cullenllp.com).

This advisory provides a brief overview of recent legislative developments and does not constitute legal advice. Nothing herein creates an attorney-client relationship between the sender and recipient.