The HIRE Act: A New Legislative Threat to Outsourcing in the U.S.

In September 2025, the U.S. Senate introduced the Halting International Relocation of Employment Act (HIRE Act). This bill proposes a fundamental change in the tax treatment of outsourcing by imposing a 25% excise tax on certain payments made to foreign service providers and denying tax deductions for those same payments.

If enacted, this legislation will significantly impact industries that rely on offshore labor serving U.S. consumers—including the Hotel & Resorts sector. Below, we break down the key provisions, direct implications, and strategic steps your business should take now.

What Is the HIRE Act?

The HIRE Act seeks to disincentivize outsourcing by making it far more costly. It introduces two main mechanisms:

1. The 25% Excise Tax (New IRC §5000E)

• Applies to “outsourcing payments,” meaning any fee, royalty, or service charge paid to a foreign person for services benefiting U.S. consumers.

• Foreign person = any entity not organized in the U.S. or its possessions (including affiliated entities abroad).

• Not deductible: Excise tax payments cannot be deducted from taxable income.

2. Denial of Income Tax Deduction (New IRC §280I)

• In addition to the excise tax, the underlying outsourcing payment itself will no longer be deductible as a business expense.

• This creates a double negative tax impact for companies relying on offshore services.

3. Domestic Workforce Fund

Revenue collected from the excise tax and penalties will be directed to U.S. workforce development and retraining programs.

4. Effective Date

If passed, the Act will apply to payments made after December 31, 2025.

Direct Implications for the Hotel & Resorts Industry

Your operations may be exposed in several critical areas, including:

• Centralized Reservation Call Centers: Payments to offshore vendors or subsidiaries handling U.S. booking calls.

• IT & Software Support: Foreign service providers maintaining PMS, CRM platforms, websites, and apps for U.S. guests.

• Revenue Management & Digital Marketing: Offshore agencies managing SEO, PPC, social media, or pricing strategies targeting U.S. consumers.

• Accounting & Back-Office Functions: Outsourcing of payroll, accounts payable, or financial reporting abroad.

• Design & Consulting Services: Royalties or fees to international design firms for hotel concepts deployed in the U.S.

Financial Impact Example:

• Current Law: $1,000,000 annual payment to a foreign IT firm = deductible expense.

• Under the HIRE Act:

  • 25% Excise Tax = $250,000

  • Lost Deduction = $210,000 (at 21% corporate tax rate)

  • Total Additional Annual Cost = $460,000

Strategic Recommendations

While the HIRE Act is not yet law, proactive planning is essential. We recommend:

1. Immediate Internal Audit: Identify all vendor relationships and intercompany charges involving foreign entities that provide services to U.S. consumers. Quantify the exposure.

2. Review Service Agreements Look for termination, force majeure, or renegotiation clauses that could mitigate sudden cost changes.

3. Evaluate Alternatives

   • Onshoring/Nearshoring: Assess the feasibility of moving services back to the U.S. or its possessions (exempt from the Act).

   • Automation: Explore automation to reduce reliance on labor-intensive offshore services.

4. Transfer Pricing Review: If services are provided by related foreign entities, expect scrutiny. The Act authorizes new regulations to prevent avoidance through transfer pricing.

5. Stay Engaged Closely monitor the bill’s progress through Congress. We will continue providing updates as it evolves.

Conclusion

The HIRE Act poses a substantial legislative risk. By combining a 25% excise tax with the loss of deductions, it fundamentally changes the economics of outsourcing. For hotels and resorts that depend heavily on offshore functions, this could erode profitability.

Prudent management requires:

• A thorough assessment of current outsourcing exposure.

• Legal and contractual reviews.

• Contingency planning to mitigate financial risks.

While this analysis focuses on the Hotel & Resorts Industry, the Act’s impact will extend across the broader BPO and call center sectors.

How We Can Help

At Ojeda & Caro Abogados, we are prepared to support your business through:

• Internal legal audits

• Contract reviews

• Strategic planning for legislative change

📩 For tailored guidance, contact us at contacto@ojedaycaro.com.

Disclaimer: This analysis is based on proposed legislative text and is for informational purposes only. It does not constitute formal legal advice. The bill is subject to change as it moves through the legislative process.