The Proposed HIRE Act: What It Could Mean for Companies Using Offshore Teams

If you've seen headlines about a new tax on outsourcing, you're likely referring to the HIRE Act — a proposed piece of federal legislation that would impose a 25% excise tax on certain "outsourcing payments" made by U.S. companies. It hasn't been enacted. But it's worth understanding now, because the details matter more than the headline.

What the bill actually targets

As drafted, the proposed tax is aimed at cross-border payments between related entities — think a U.S. parent company paying its own offshore subsidiary to perform work that used to be done domestically. It sits alongside the existing Base Erosion and Anti-Abuse Tax (BEAT), which is already scheduled to rise to 12.5% in 2026 under prior tax law, independent of this new proposal.

What it doesn't automatically touch

This is the part that gets lost in the discussion: the HIRE Act, as proposed, is aimed at intercompany transfers — a company shifting work to its own foreign affiliate — not at arm's-length relationships with independent third-party vendors. Hiring an external outsourcing or staffing partner is a different kind of arrangement than routing work to your own subsidiary abroad, and that distinction is likely to matter a great deal in how any final version of this bill is written and applied.

What to actually do right now

• Don't restructure anything based on a bill that hasn't passed
• Do keep clear documentation distinguishing vendor relationships from any related-party arrangements
• Talk to your tax advisor if a meaningful share of your operations run through your own foreign entity rather than an independent partner