Senate Considers Bill Designed to Reduce Outsourcing of U.S. Jobs

The Senate on Monday began its consideration of the Creating American Jobs and Ending Offshoring Act (S. 3816), a bill that would provide employers with tax incentives to maintain jobs in the United States, and eliminate tax advantages for outsourcing work. Introduced on September 21, 2010, this legislation would do the following:

Provide Tax Incentives to Create U.S. Jobs

The bill would create a payroll tax break for employers that replace foreign workers with American workers. Specifically, the measure provides for a two-year Social Security tax break on wages paid to U.S. employees who have replaced their foreign counterparts. The payroll tax holiday would be available for two years for employees hired during a three-year period beginning on September 22, 2010. To be eligible for this break, employers would be required to certify that the U.S. employee is replacing a foreign worker who had been performing the same or similar job.

Create Disincentives to Moving Jobs Overseas

To discourage foreign outsourcing, the legislation would prevent employers from taking a tax deduction, loss, or credit if they downsize or cease operations altogether in the U.S. and subsequently expand or reopen overseas. In essence, employers would not be able to count the costs of moving operations overseas as a business expense. This prohibition would not apply to any severance payments or costs related to outplacement services or retraining for employees laid off as a result of outsourcing. Businesses would be able to appeal to the Treasury Secretary for an exemption if such activities do not result in any loss of U.S. jobs.

The bill would also end an employer’s ability to defer taxes on income earned by foreign subsidiaries until that income is brought back into the U.S. This prohibition on deferral would not apply to businesses that establish foreign operations to sell their products abroad.

A cloture vote on the legislation is expected to occur on Tuesday, although it appears that the vote will fail.

Update:  On Tuesday, September 28, 2010, the Senate voted 53-45 to defeat the motion to begin debate on this bill.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.