Congress gets bills that attack offshoring

House votes to close tax loopholes; Schumer to file Senate bill that would tax offshore call centers

U.S. Sen. Charles Schumer (D-NY), who often sits at the heart of H-1B and offshoring debates, plans to launch a legislative attack on offshore call centers.

Schumer said Tuesday that he plans to introduce legislation requiring that firms disclose in publicly available reports their offshore call center practices, and to pay a tax on every call sent offshore.

The bill, according to details released yesterday, sets out three requirements.

First, it would impose a 25-cent excise tax on any customer service call that originates in the U.S. and is transferred to personnel located in a foreign location.

Second, the legislation requires that companies inform customers of where a call is answered.

And third, the bill would require that companies publicly disclose quarterly and in their annual reports submitted to the Securities and Exchange Commission how many customer calls they received and how many are sent overseas.

"If we want to put a stop to the outsourcing of American jobs, than we need to provide incentives for American companies to keep American jobs here," Schumer said in a statement. "This bill will not only serve to maintain call center jobs currently in the United States, but also provide a reason for companies that have already outsourced jobs to bring them back," he said.

This isn't the first time legislation aimed at curbing the use of overseas call centers by U.S. firms has been proposed in Congress. In 2003 U.S. Sen. -- and presidential candidate -- John Kerry introduced a bill that would require call center employees to disclose their location at the commencement of each call. The bill did not become law.

But in proposing a tax on overseas calls, Schumer's bill would go much further.

Some states have tried to act on the issue as well.

For example, New Jersey in 2005 approved a law that requires all state work to be performed in the U.S. The law was sparked by offshoring of government call center services.

The New Jersey law has no impact on private sector jobs or on the state's use of IT contracting firms that primarily employ foreign workers holding H-1B visas.

The main event in the offshoring debate to date has been the use of H-1B and L-1B visas, and not call centers.

As chairman of the Immigration, Refugees and Border Security subcommittee, Schumer is the point person on immigration for Democrats in the Senate.

He is working on a comprehensive immigration reform bill that's expected to make permanent residency or green cards widely available to foreign students who graduate with advanced degrees in science, math and engineering. The bill will also incorporate some of the restrictions sought on H-1B use by Sens. Dick Durbin (D-Ill.) and Charles Grassley (R-Iowa.), including a provision limiting the number of H-1B workers at outsourcing firms to no more than half of their U.S. employee headcount.

Ron Hira, associate professor of public policy at the Rochester Institute of Technology, said Schumer's call center efforts "are still baby steps in addressing the outsourcing of jobs. Closing the H-1B and L-1 visa loopholes would create and retain many more jobs for Americans than this particular bill."

Schumer's bill follows the approval of the American Jobs and Closing Tax Loopholes Act, which would close tax loopholes that its proponents said encouraged offshoring, in the U.S. House last week.

Kimberly Clausing, a professor of economics at Reed College in Portland, Ore., said tax rules now enable firms to keep income in low tax locations without paying taxes in the U.S. She added that the House bill is aimed more at generating revenue rather than requiring companies file reports on their use of overseas workers.

"These rules [approved by the House] have more to do with reporting of income than the location of jobs," said Reed, who said that it won't necessarily change the business case in determining the location of jobs.

President Barack Obama argued throughout his election campaign for closing of loopholes.

And he raised the issue of call centers last December by drawing attention to Arise Virtual Solutions, a Miramar, Fla.-based company that uses a homeshoring model, hiring U.S. workers as independent contractors to deliver customer support.

Obama said that its CEO, Angie Selden, the CEO, "explained how she's creating thousands of call-in sales jobs, bringing jobs back to the United States that have gone overseas in the last several years."

The outlook on Schumer's legislation is uncertain.

Josh Lamel, a senior vice president at industry group TechAmerica, said an excise tax on international trade "is a concern to the industry."

The Schumer bill raises a number of issues, including issue potential retaliatory actions by foreign countries. "The last thing we need is countries throwing excises taxes at each other," Lamel said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld . Follow Patrick on Twitter at @DCgov , or subscribe to Patrick's RSS feed . His e-mail address is .

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Copyright © 2010 IDG Communications, Inc.

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