HIRE Act 2025: How a proposed US outsourcing tax bill threatens India’s $100 billion IT export engine

A new Senate bill — the Halting International Relocation of Employment (HIRE) Act — would levy a 25% excise tax on payments US companies make to foreign persons for services that benefit consumers in the United States. It also bans tax deductions for those outsourcing payments and sends the proceeds to a Domestic Workforce Fund for apprenticeships and retraining.

The bill, introduced by Ohio senator Bernie Moreno, if enacted would materially raise the effective cost of offshore IT and back-office work and could force a strategic reset across the US-India technology corridor.

What the bill says

• 25% excise on “outsourcing payments”. The tax applies to any premium, fee, royalty or service payment made by a US person to a “foreign person” when the benefit is directed—“directly or indirectly” — to consumers in the US. For mixed markets, the bill apportions the payment by US vs non-US consumer share.  
• No deductions. Outsourcing payments themselves would not be deductible for income-tax purposes, and the excise is non-deductible as well.  
• Stiff penalties and reporting. Treasury may require information returns and corporate officer certifications; failure-to-pay penalties specific to this chapter are increased.  
• Domestic Workforce Fund. Receipts flow into a new fund to finance Department of Labor programs and state grants for workforce development and apprenticeships.  
• Timing. Provisions would apply to payments made after December 31, 2025 (still a proposal; not law).  

Why it matters for US-India tech

The US is the largest market for Indian IT services and global capability centres (GCCs). A 25% excise, plus denial of deductions, would sharply raise the all-in cost of offshore delivery for US buyers. On a simple illustration, a $100 outsourcing payment could face $25 in excise and — because it’s no longer deductible — roughly $21 of additional federal income tax at a 21% corporate rate, taking the incremental burden near 46% before any state taxes. (The exact impact will vary by company.)

Coverage likely extends beyond big vendors. The text targets payments to any “foreign person”, with anti-avoidance language aimed at related parties and transfer-pricing structures. That suggests captive centers, affiliates, contractors and freelancers abroad could be in scope when the work benefits US consumers — even indirectly — pending Treasury guidance.

What changes if it becomes law

1) Price and margin resets. US buyers would likely renegotiate rates, shift to onshore or near-shore delivery (US, Canada, Mexico), or rebalance work to markets serving non-US customers to reduce the apportionment numerator. Indian providers may see margin compression or push for client-pays clauses.

2) Contract engineering and compliance overhead. Expect detailed scoping to classify end-beneficiaries, time-tracking by market, and enhanced documentation to defend apportionment and “consumer” interpretations. Treasury rulemaking will be pivotal.

3) Strategy shifts for GCCs. Multinationals with Indian captives may re-route internal charges, expand US hubs, or insource critical roles domestically to avoid the excise. Anti-avoidance clauses mean simple entity reshuffles won’t be enough.

4) Acceleration of AI automation. To offset higher human-services costs, enterprises may automate Tier-1 support, QA, and back-office workflows, reducing offshore FTE counts while keeping specialized roles.

5) Political and trade friction. India’s $100 billion-plus IT export engine is deeply tied to US demand; industry groups would lobby for carve-outs (e.g., R&D, cybersecurity, small vendors) or clarifications on “consumer benefit.” Parallel rhetoric from Trump-aligned figures about curbing IT offshoring underscores the political salience.

Sector-by-sector impact (US-India lens)

• IT services & ADM: Highest exposure; large Indian firms (TCS, Infosys, Wipro, HCLTech, Tech Mahindra) and mid-tier vendors face pricing and volume risk on US-facing portfolios. (Context: the sector derives a majority of revenue from the US).
• BPM/call centers: Bullseye segment; “consumer-directed” benefit language maps closely to customer support.  
• Product engineering/R&D: Impact hinges on whether outputs are viewed as benefiting US consumers or internal enterprise functions; guidance will matter.  
• Startups using global freelancers: Payments to overseas developers and designers for US apps/sites could become costlier; compliance burden rises for SMEs.  

What companies should do now

• Map exposure: Identify all foreign-party service payments tied to US end-users; model cost sensitivity at 25% excise plus lost deductibility.  
• Contract hygiene: Add market-based scoping for deliverables, apportionment methods, and change-in-law clauses.  
• Operating model options: Evaluate US/near-shore pods, hybrid on-off models, and automation to maintain service levels. 
• Policy engagement: Coordinate with industry bodies in Washington and New Delhi to seek clarity and, if needed, targeted relief. 

The bottom line 

The HIRE Act’s structure — a 25% excise plus denial of deductions — is designed to tilt the math decisively toward domestic hiring. If enacted, US buyers would pay more to keep work offshore, and Indian IT and BPM providers would face a strategic reset on US-facing delivery. The final impact will turn on Congress and Treasury: how far the bill gets, how “consumer benefit” is defined, and how aggressively anti-avoidance rules are enforced.