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

Businesses lose outsourcing deduction

This bill would deny any tax deduction for an "outsourcing payment." An outsourcing payment would include a premium, fee, royalty, service charge, or other payment a U.S. business makes to a foreign person for labor or services that benefit U.S. customers. For payments that serve both U.S. and non-U.S. customers, the nondeductible part would equal the payment times (U.S.-directed services ÷ total services). The bill would exclude corporations and partnerships formed in U.S. possessions from the definition of foreign person. The Treasury would issue rules to prevent avoidance, including through transfer pricing. The rule would apply to payments made after December 31, 2025, in taxable years ending after that date.