Anti-Offshoring Tax Bill Introduced in Senate

Late on September 21, Senator Dick Durbin (D-IL) introduced S. 3816, the “Creating American Jobs and Ending Offshoring Act.” The Senate may vote on the measure during the week of September 27.

This new “anti-offshoring” bill would provide businesses with relief from the employer share of the Social Security payroll tax on wages paid to new U.S. employees performing services in the U.S., but only to businesses certifying that the U.S. employee is replacing an employee who had been performing similar duties overseas. This payroll tax relief would be available for 24 months for employees hired during the three-year period beginning Sept. 22, 2010.

Effective on the enactment date (with transitional rules for existing transactions), S. 3816 also would prohibit a firm from taking any deduction, loss or credit for amounts paid in connection with reducing or ending the operation of a domestic trade or business and starting or expanding a similar trade or business overseas. The prohibition would not, however, apply to any severance payments or costs associated with outplacement services or employee retraining provided to any employees that lose their jobs as a result of the offshoring. Firms could apply for exemptions for transactions that don't result in the loss of employment in the U.S.

The bill also would end the rule allowing U.S. companies to defer paying U.S. tax on income earned by their foreign subsidiaries until that income is brought back to the U. S. The change would apply to tax years of foreign corporations beginning after the enactment date, and to tax years of U.S. shareholders within which or with which the tax years of such foreign corporations end. However, U.S. companies that locate facilities abroad in order to sell their products overseas would not be affected by this proposal.