Fair Playing Field Act of 2010 - Amends the Internal Revenue Code, with respect to the classification of workers for employment tax purposes, to: (1) repeal the prohibition against issuance of regulations and guidance by the Secretary of the Treasury on workers' employment tax status (i.e., as an employee or as an independent contractor) enacted by the Revenue Act of 1978; (2) direct the Secretary to issue regulations and other guidance to clarify the proper employment status of workers for employment tax purposes; (3) prohibit a retroactive assessment of employment tax, except with respect to certain skilled workers, for tax periods after December 31, 1978, and before a specified reclassification date for worker misclassifications, unless the taxpayer had no reasonable basis for not treating a worker as an employee; (4) require taxpayers who hire independent contractors on a regular and ongoing basis to provide such contractors with notice of their federal tax obligations, the labor and employment law protections that do not apply to them, and their right to seek a status determination from the Internal Revenue Service (IRS); and (5) eliminate reduced penalty provisions for failure to withhold income taxes for taxpayers who lack a reasonable basis for treating a worker as other than an employee (i.e., as an independent contractor).
[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6128 Introduced in House (IH)]
111th CONGRESS
2d Session
H. R. 6128
To amend the Internal Revenue Code of 1986 to permit the Secretary of
the Treasury to issue prospective guidance clarifying the employment
status of individuals for purposes of employment taxes and to prevent
retroactive assessments with respect to such clarifications.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 15, 2010
Mr. McDermott (for himself, Mr. Chandler, Ms. Woolsey, Ms. Sutton, Mr.
George Miller of California, Ms. Richardson, Mrs. Capps, Mr. Tierney,
Ms. Speier, Mr. Critz, Mr. Loebsack, and Ms. Loretta Sanchez of
California) introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to permit the Secretary of
the Treasury to issue prospective guidance clarifying the employment
status of individuals for purposes of employment taxes and to prevent
retroactive assessments with respect to such clarifications.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; FINDINGS; PURPOSES.
(a) Short Title.--This Act may be cited as the ``Fair Playing Field
Act of 2010''.
(b) Findings.--Congress makes the following findings:
(1) In 1978, Congress was concerned that lack of clarity as
to the proper classification of some workers, increased IRS
enforcement activity, and retroactive application by IRS of
interpretations that were arguably new had caused hardships for
some small businesses and other taxpayers and confusion as to
the applicable rules.
(2) To allow time to develop a comprehensive approach to
the problem, Congress enacted section 530 of the Revenue Act of
1978 as an interim measure protecting taxpayers from liability
for misclassification if the taxpayer has a reasonable basis
for classifying a worker as an independent contractor and meets
certain other conditions. In addition, the Act prohibited the
Secretary of the Treasury from publishing regulations or
revenue rulings on workers' employment tax status pending the
expected near-term enactment of clarifying legislation.
(3) During the ensuing 32 years, Congress made section 530
of the Revenue Act of 1978 permanent, however, changes in
working relationships and the continued prohibition on new
guidance have increased the uncertainty as to the proper
classification of workers.
(4) Many workers are properly classified as independent
contractors. In other instances, workers who are employees are
being treated as independent contractors. Such
misclassification for tax purposes contributes to inequities in
the competitive positions of businesses and to the Federal and
State tax gap, and may also result in misclassification for
other purposes, such as denial of unemployment benefits,
workplace health and safety protections, and retirement or
other benefits or protections available to employees.
(5) Workers, businesses, and other taxpayers will benefit
from clear guidance regarding employment tax status. In the
interest of fairness and in view of many service recipients'
reliance on current section 530, such guidance should apply
only prospectively.
(c) Purposes.--The purposes of this Act are to permit the Secretary
of the Treasury to provide guidance allowing workers and businesses to
clearly understand the proper federal tax classification of workers and
to provide relief allowing an orderly transition to new rules designed
to increase certainty and uniformity of treatment.
SEC. 2. AUTHORITY TO ISSUE GUIDANCE CLARIFYING EMPLOYMENT STATUS FOR
PURPOSES OF EMPLOYMENT TAXES.
(a) In General.--Chapter 25 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new section:
``SEC. 3511. AUTHORITY TO ISSUE GUIDANCE CLARIFYING EMPLOYMENT STATUS.
``(a) In General.--The Secretary shall issue such regulations or
other guidance as the Secretary determines to be necessary or
appropriate to clarify the proper employment status of individuals for
purposes of any tax imposed by this subtitle.
``(b) Prohibition on Retroactive Assessments.--
``(1) In general.--If--
``(A) for purposes of any tax imposed by this
subtitle, the taxpayer did not treat an individual as
an employee for any period before the reclassification
date with respect to such individual, and
``(B) in the case of periods after December 31,
1978, and before such reclassification date, all
Federal tax returns (including information returns)
required to be filed by the taxpayer with respect to
such individual for such period are filed on a basis
consistent with the taxpayer's treatment of such
individual as not being an employee,
then, for purposes of applying such taxes for periods before
such reclassification date with respect to the taxpayer, the
individual shall be deemed not to be an employee unless the
taxpayer had no reasonable basis for not treating such
individual as an employee.
``(2) Statutory standards providing one method of
satisfying the requirements of paragraph (1).--For purposes of
paragraph (1), a taxpayer shall in any case be treated as
having a reasonable basis for not treating an individual as an
employee for a period if the taxpayer's treatment of such
individual for such period was in reasonable reliance on any of
the following:
``(A) Judicial precedent, published rulings,
technical advice with respect to the taxpayer, or a
letter ruling to the taxpayer.
``(B) A past Internal Revenue Service audit of the
taxpayer in which there was no assessment attributable
to the treatment (for purposes of any tax imposed by
this subtitle) of the individuals holding positions
substantially similar to the position held by such
individual.
``(C) Long-standing recognized practice of a
significant segment of the industry in which such
individual was engaged.
``(3) Consistency required in the case of prior tax
treatment.--Paragraph (1) shall not apply with respect to the
treatment of any individual (hereafter in this paragraph
referred to as the reclassified individual) for purposes of any
tax imposed by this subtitle for any period ending after
December 31, 1978, if the taxpayer (or a predecessor) has
treated any individual holding a substantially similar position
as an employee for purposes of any tax imposed by this subtitle
for any period beginning after December 31, 1977, and ending
before the reclassification date with respect to such
reclassified individual.
``(c) Definitions.--For purposes of this section--
``(1) Reclassification date.--
``(A) In general.--The term `reclassification date'
means, with respect to any individual, the earlier of--
``(i) the first day of the first calendar
quarter beginning more than 180 days after the
date of an employee classification
determination with respect to such individual,
or
``(ii) the effective date of the first
applicable final regulation issued by the
Secretary under subsection (a) with respect to
such individual (or, if later, the first day of
the first calendar quarter beginning more than
180 days after such regulation is issued).
``(B) Employee classification determination.--The
term `employee classification determination' means,
with respect to any individual, a determination by the
Secretary, in connection with an audit of the taxpayer
which is described in section 7436 and which commences
after the date which is 1 year after the date of the
enactment of this section, that a class of individuals
holding positions with such taxpayer which are
substantially similar to the position held by such
individual are employees.
``(C) First applicable final regulation.--The term
`first applicable final regulation' means, with respect
to any individual, the first final regulation (or other
guidance of general applicability) which sets forth the
factors for determining the employment status of a
class of individuals holding positions substantially
similar to the position held by such individual.
``(2) Employment status.--The term `employment status'
means the status of an individual, under the usual common law
rules applicable in determining the employer-employee
relationship, as an employee or as an independent contractor
(or other individual who is not an employee).
``(d) Continuation of Certain Special Rules Applicable Under the
Revenue Act of 1978.--
``(1) Exception for certain skilled workers.--Subsection
(b) shall not apply in the case of an individual who, pursuant
to an arrangement between the taxpayer and another person,
provides services for such other person as an engineer,
designer, drafter, computer programmer, systems analyst, or
other similarly skilled worker engaged in a similar line of
work.
``(2) Notice of availability of section.--An officer or
employee of the Internal Revenue Service shall, before or at
the commencement of any audit inquiry relating to the
employment status of one or more individuals who perform
services for the taxpayer, provide the taxpayer with a written
notice of the provisions of this section.
``(3) Rules relating to statutory standards.--For purposes
of subsection (b)(2)--
``(A) a taxpayer may not rely on an audit commenced
after December 31, 1996, for purposes of subparagraph
(B) thereof unless such audit included an examination
for purposes of any tax imposed by this subtitle
whether the individual involved (or any individual
holding a position substantially similar to the
position held by the individual involved) should be
treated as an employee of the taxpayer,
``(B) in no event shall the significant segment
requirement of subparagraph (C) thereof be construed to
require a reasonable showing of the practice of more
than 25 percent of the industry (determined by not
taking into account the taxpayer), and
``(C) in applying the long-standing recognized
practice requirement of subparagraph (C) thereof--
``(i) such requirement shall not be
construed as requiring the practice to have
continued for more than 10 years, and
``(ii) a practice shall not fail to be
treated as long-standing merely because such
practice began after 1978.
``(4) Availability of safe harbors.--Nothing in this
section shall be construed to provide that subsection (b) only
applies where the individual involved is otherwise an employee
of the taxpayer.
``(5) Burden of proof.--
``(A) In general.--If--
``(i) a taxpayer establishes a prima facie
case that it was reasonable not to treat an
individual as an employee for purposes of
subsection (b), and
``(ii) the taxpayer has fully cooperated
with reasonable requests from the Secretary,
then the burden of proof with respect to such treatment
shall be on the Secretary.
``(B) Exception for other reasonable basis.--In the
case of any issue involving whether the taxpayer had a
reasonable basis not to treat an individual as an
employee for purposes of subsection (b), subparagraph
(A) shall only apply for purposes of determining
whether the taxpayer meets the requirements of
subparagraph (A), (B), or (C) of subsection (b)(2).
``(6) Preservation of prior period safe harbor.--If--
``(A) an individual would (but for the treatment
referred to in subparagraph (B)) be deemed not to be an
employee of the taxpayer under subsection (b) for any
prior period, and
``(B) such individual is treated by the taxpayer as
an employee for purposes of the taxes imposed by this
subtitle for any subsequent period,
then, for purposes of applying such taxes for such prior period
with respect to the taxpayer, the individual shall be deemed
not to be an employee.
``(7) Substantially similar position.--For purposes of
subsection (b) and this subsection, the determination as to
whether an individual holds a position substantially similar to
a position held by another individual shall include
consideration of the relationship between the taxpayer and such
individuals.
``(8) Treatment of test room supervisors and proctors who
assist in the administration of college entrance and placement
exams.--
``(A) In general.--In the case of an individual
described in subparagraph (B) who is providing services
as a test proctor or room supervisor by assisting in
the administration of college entrance or placement
examinations, subsection (b) shall be applied to such
services performed after December 31, 2006 (and
remuneration paid for such services) without regard to
paragraph (3) thereof.
``(B) Applicability.--An individual is described in
this subparagraph if the individual--
``(i) is providing the services described
in subsection (b) to an organization described
in section 501(c) and exempt from tax under
section 501(a), and
``(ii) is not otherwise treated as an
employee of such organization for purposes of
this subtitle.
``(e) Statements to Independent Contractors.--
``(1) In general.--Each person who contracts for the
services of an independent contractor on a regular and ongoing
basis, within the scope of such person's trade or business,
shall provide a written statement to such independent
contractor notifying such independent contractor of the Federal
tax obligations of an independent contractor, the labor and
employment law protections that do not apply to independent
contractors, and the right of such independent contractor to
seek a status determination from the Internal Revenue Service.
``(2) Independent contractor.--For purposes of this
subsection, the term `independent contractor' means any
individual who is not treated as an employee by the person
receiving the services referred to in paragraph (1).
``(3) Timing of statement.--Except as otherwise provided by
the Secretary, the statement required under paragraph (1) shall
be provided within a reasonable period of entering into the
contract referred to in paragraph (1).
``(4) Development of model statement.--The Secretary shall
develop model materials for providing the statement required
under paragraph (1).''.
(b) Reduced Penalty Not Applicable in Cases of Noncompliance With
Guidance Without Reasonable Basis.--Subsection (c) of section 3509 of
such Code is amended--
(1) by striking ``if such liability'' and inserting ``if--
``(1) such liability'', and
(2) by striking the period at the end and inserting ``, or
``(2) such liability relates to an individual who is
treated as an employee under regulations or other guidance
issued by the Secretary under section 3511(a) and the taxpayer
lacks a reasonable basis for treating the individual as other
than an employee.
In the case of a taxpayer which has received a final written
determination from the Internal Revenue Service holding that the
individual referred to in paragraph (2) (or another individual who
holds a position with the taxpayer substantially similar to the
position held by such individual) is an employee, such taxpayer shall
be treated for purposes of paragraph (2) as lacking a reasonable basis
for treating such individual as other than an employee with respect to
periods beginning on and after the first day of the first calendar
quarter beginning more than 180 days after the date of such written
determination unless the taxpayer establishes by clear and convincing
evidence that the taxpayer has a reasonable basis for such
treatment.''.
(c) Conforming Amendments.--
(1) Paragraph (2) of section 6724(d) of such Code is
amended by striking ``or'' at the end of subparagraph (GG), by
striking the period at the end of subparagraph (HH) and
inserting ``, or'', and by inserting after subparagraph (HH)
the following new subparagraph:
``(II) section 3511(e) (relating to statements to
independent contractors).''.
(2) Paragraph (2) of section 7436(a) of such Code is
amended by striking ``subsection (a) of section 530 of the
Revenue Act of 1978'' and inserting ``section 3511(b)''.
(3) The table of sections for chapter 25 of such Code is
amended by adding at the end the following new item:
``Sec. 3511. Authority to issue guidance clarifying employment
status.''.
(d) Termination of Section 530 of the Revenue Act of 1978.--The
Revenue Act of 1978 is amended by striking section 530.
(e) Reports on Worker Misclassification.--Beginning with the first
fiscal year beginning after the date the first regulation or other
guidance is issued for public comment under section 3511(a) of the
Internal Revenue Code of 1986 (as added by this section):
(1) A report each fiscal year on worker classification
which shall include the total number of examinations of
employers initiated because of suspected worker classification
issues, the total number of examinations that included
determinations on worker classification issues, the amount of
additional tax liabilities associated with worker
classification enforcement actions, the number of workers
reclassified as a result of these actions, the number of
requests for Determination of Worker Status (Form SS-8), and
technical guidance on how to understand the data provided in
the report.
(2) A report each fiscal year in which new statistically
valid data is compiled and interpreted on worker
classification, prepared on the basis of information gathered
during an Employment Tax Study conducted by the National
Research Program (NRP) of the Internal Revenue Service. Such
report shall provide statistical estimates of the number of
employers misclassifying workers, the number of workers
misclassified, the industries involved, data interpretations
and conclusions, and a description of the impact of improper
worker classification on the employment tax gap.
(f) Effective Dates.--
(1) Delayed effective date of regulations and guidance.--
Any regulation or other guidance issued under section 3511(a)
of the Internal Revenue Code of 1986, as added by this section,
shall not apply to services rendered before the date which is 1
year after the date of the enactment of this Act.
(2) Authority to issue regulations and guidance
immediately.--So much of the amendment made by subsection (d)
as relates to subsection (b) of section 530 of the Revenue Act
of 1978 shall take effect on the date of the enactment of this
Act.
(3) Delayed termination of remainder of section 530 of the
revenue act of 1978.--Except as provided in paragraph (2), the
amendments made by subsections (c)(1) and (d) shall apply to
services rendered on or after the date which is 1 year after
the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line