Bill Proposes 25% Tax on Offshore Service Payments
Businesses paying overseas providers for outsourced work face a possible new excise tax or loss of deductions.
Updated on Nov. 2, 2026 in Jobs — General
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Republican Senator Bernie Moreno of Ohio introduced the HIRE Act in October 2025, proposing a 25 percent excise tax on specified outsourcing payments that US taxpayers make to foreign persons. A related House bill from Representative Austin Scott of Georgia, introduced in February 2026, would instead deny income-tax deductions for qualifying outsourcing payments; neither has cleared Congress.
Why it matters
For US businesses that buy services from overseas providers, the proposals signal a possible rise in the cost of offshore contracts, either through an excise tax or through the loss of a deduction. Because neither measure has passed, operators are watching a policy risk rather than a settled rule.
US purchases of Indian software services reached $119.7 billion in FY26, up from $108.3 billion the prior year. The surveyed Indian companies reported 425,960 employees and $40 billion in tangible investments, though the survey covers only 163 firms.
The players
Bernie Moreno
Republican US Senator from Ohio and sponsor of the HIRE Act, who said he wanted to discourage American companies from moving jobs overseas.
Austin Scott
Republican US Representative from Georgia who introduced the related House bill denying income-tax deductions for qualifying outsourcing payments.
Confederation of Indian Industry
Industry body whose 2023 survey of 163 Indian companies operating across the US reported their US employment and investment figures.
The details
The Senate HIRE Act would apply a 25 percent excise tax to specified payments US taxpayers make to foreign persons for outsourced work, and it would disallow income-tax deductions on those payments. The House bill drops the excise tax and relies only on the deduction denial, which changes the cost mechanism for a company deciding whether to keep work offshore. The HIRE Act also proposes directing tax revenue toward domestic workforce training and apprenticeships.
Timeline
October 2025: Senator Bernie Moreno introduced the HIRE Act.
February 2026: Representative Austin Scott introduced the related House bill.
FY26: US purchases of Indian software services reached $119.7 billion.
November 3, 2026: US midterm elections are held.
January 2027: The next Congress convenes.
Market Landscape
The HIRE Act and its House companion revive a debate over offshoring that Congress has taken up in prior sessions, with the Senate version adding a direct excise tax that the House measure omits. Because US purchases of Indian software services are large and concentrated, any tax on those payments would fall unevenly across the outsourcing market.
Operators who buy offshore software or services should model the cost of a 25 percent excise tax and the loss of a deduction against current contracts. Finance teams should consult qualified tax counsel before changing sourcing plans, since neither measure is law.
The takeaway
Offshoring costs could rise sharply if either bill is enacted, so businesses should track the HIRE Act and the House bill as they move through committee. Review offshore vendor contracts now to understand exposure, and bring any sourcing changes to qualified tax counsel.
Further reading
For broader context on how offshoring affects hiring decisions, see the Jobs — General coverage.
Source note: This article includes information reported by MoneyControl.
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