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Congress·In Committee

New Bill Targets Tax Breaks for Companies That Outsource Services to Foreign Workers

To amend the Internal Revenue Code of 1986 to deny deduction for outsourcing payments.

21 days ago·View on Congress.gov

Legislative Progress

✓ Filed
Review
House
Senate
President

Key Points

  • This bill would stop companies from subtracting the cost of foreign labor from their taxes if that labor is used to serve customers in the United States.
  • Under current law, businesses can often lower their tax bills by deducting the money they spend on services, even if those services are performed by workers in other countries.
  • The proposal defines 'outsourcing payments' as fees or service charges paid to foreign individuals or companies for work that benefits people living in the U.S.
  • If a company uses foreign services for both U.S. and international customers, the bill would only block the tax deduction for the portion of the work that goes to Americans.
  • The change is intended to make it more expensive for companies to move service jobs overseas, potentially encouraging them to hire more workers within the United States.
  • If this becomes law, the new rules would apply to all payments made after December 31, 2025.
TaxesLabor EmploymentEconomy Finance

Impact Analysis

Scores: 1 = low, 5 = highSentiment: -5 to +5 (net benefit)

State Impacts

Scores: 1 = low, 5 = highSentiment: -5 to +5 (net benefit)

Milestones

2 milestones2 actions
Feb 12, 2026House

Referred to the House Committee on Ways and Means.

Feb 12, 2026

Introduced in House

What Happens Next

Projected impacts based on AI analysis

1-2 years after enactment

IRS issues regulations and guidance on the new rules

The IRS would need to write detailed rules explaining exactly how businesses should calculate their outsourcing payments and what counts as a deductible vs. non-deductible expense, which could take a year or more after enactment.

Source Information

Document Type

Congressional Bill

Official Title

To amend the Internal Revenue Code of 1986 to deny deduction for outsourcing payments.

Bill NumberHR 7559
Congress119th Congress
ChamberHouse of Representatives
Latest ActionReferred to the House Committee on Ways and Means.

Sponsor

Analysis generated by AI. While we strive for accuracy, this should not be considered legal or professional advice. Always verify information with official government sources.