HIRE Act

Summary#

This bill creates a new excise tax on certain payments U.S. persons make to foreign persons for services that benefit consumers in the United States. The tax is 25 percent of any such payment called an "outsourcing payment." An "outsourcing payment" includes premiums, fees, royalties, service charges, or other payments made in the course of a trade or business to a foreign person when the labor or services benefit U.S. consumers.

The bill sets rules for mixed payments that cover both U.S. and non-U.S. consumers: only the share of the payment that is directed to U.S. consumers is taxed. It excludes entities organized under the laws of a U.S. possession from the definition of "foreign person." The Treasury Secretary must write regulations to prevent avoidance, including rules about related parties and transfer pricing.

The bill also: (1) lets the Treasury require taxpayers to file tax or information returns about these payments and to have corporate officers certify payment character under penalty of perjury; (2) raises the failure-to-pay penalty for taxes under this new chapter by substituting "50 percent" for "05. percent" where shown and removes a stated aggregate cap; (3) creates a Domestic Workforce Fund that will receive amounts equivalent to the new tax, related additions to tax, and related penalties; and (4) bars an income tax deduction for outsourcing payments. The changes apply to payments made after December 31, 2025.

What it means for you#

• If you are a U.S. person (including a business) making payments to foreign persons for services that benefit U.S. consumers, you would owe a 25% excise tax on those payments called an outsourcing payment.
• Those outsourcing payments would not be deductible for income tax purposes.
• You may have to file special tax or information returns about the payments, and corporate officers may need to certify the returns under penalty of perjury.
• If you fail to pay the tax, the bill increases the potential penalties for nonpayment for taxes under the new chapter.
• The money collected is directed into a dedicated Domestic Workforce Fund for workforce development, apprenticeships, and state grants for job-displaced communities.

Expenses#

• The bill directs amounts equal to revenues from the new excise tax, related additions to tax, and related penalties into a trust called the Domestic Workforce Fund.
• Money in that Fund is available without further appropriation and may be used only for: (1) Department of Labor workforce development and retraining programs, (2) apprenticeship programs and industry partnerships, and (3) grants to states for workforce initiatives in communities with high job displacement.
• No publicly available information on estimated revenue, costs, or budgetary effects is included in the bill text provided.

Proponents' View#

No publicly available information.

Opponents' View#

No publicly available information.