Clarify Workers Misclassification in the Construction Industry Act

Clarify Workers Misclassification in the Construction Industry Act

This bill requires the Department of the Treasury to initiate an enforcement initiative to increase tax compliance in the construction industry.

The initiative must include:

• consultations with industry experts and leaders on its scope and priorities,
• targeted tax audits of major construction contractors that may not be in compliance with federal tax laws,
• civil and criminal tax enforcement actions under existing authorities, and
• educational efforts aimed at increasing voluntary tax compliance in the construction industry.

Treasury must promulgate rules and issue guidance to reclassify individuals who are not currently being treated as employees consistent with the proper classification of employees under common law standards within the construction industry.

In implementing this bill, Treasury must: (1) reassign personnel and resources from other activities to carry out this bill, and (2) report to Congress on the implementation and recommendations for further congressional action.

The Government Accountability Office must study the various forms of tax fraud (including employee misclassification) in the construction industry, efforts to combat fraud, and recommendations for further action.

[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5008 Introduced in House (IH)]

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114th CONGRESS
  2d Session
                                H. R. 5008

 To direct the Secretary of the Treasury to improve tax compliance in 
 the construction industry, including clarifying the employment status 
   of service providers in the construction industry, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 20, 2016

Mr. MacArthur (for himself and Mr. Kind) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To direct the Secretary of the Treasury to improve tax compliance in 
 the construction industry, including clarifying the employment status 
   of service providers in the construction industry, and for other 
                               purposes.

    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 ``Clarify Workers 
Misclassification in the Construction Industry Act''.
    (b) Findings.--Congress makes the following findings:
            (1) Worker misclassification in the construction industry 
        has reached epidemic proportions. Studies from California, 
        Tennessee, Florida, Texas, New Jersey, and other States detail 
        hundreds of millions of dollars in lost employment and income 
        taxes because of improper classification of workers for 
        taxation in the construction industry. New Jersey revenue 
        collection officials have indicated that $535 million in taxes 
        in the State are lost due to worker misclassification.
            (2) Worker misclassification takes place at construction 
        projects involving military bases, hospitals, universities, 
        convention centers, and major hotels.
            (3) There is significant anecdotal evidence that a large 
        number of workers in the construction industry are currently 
        being misclassified as independent contractors in order to 
        avoid tax withholding and other employer responsibilities, but 
        the Internal Revenue Service is barred from issuing rules or 
        guidance to reclassify these workers by section 530 of the 
        Revenue Act of 1978.
            (4) Legitimate construction contractors are unable to 
        compete with contractors who avoid employment and income taxes 
        through misclassification. This creates competitive pressure on 
        other contractors to also misclassify employees to remain 
        competitive. States, leading contractors, and construction 
        labor leaders agree that government action is needed to reverse 
        this spiral.
            (5) According to the Internal Revenue Service, a dollar 
        spent on tax enforcement typically yields an additional six 
        dollars in revenue to the Treasury. This figure does not 
        include revenue gained from deterring misclassification which 
        would increase tax revenue significantly beyond the level 
        projected.
    (c) Purposes.--The purposes of this Act are to increase efforts to 
identify and reduce misclassification, to prosecute tax evasion in the 
construction industry, and provide the Secretary of the Treasury the 
resources necessary to accomplish these objectives.

SEC. 2. DIRECTIVES AND AUTHORITIES TO IMPROVE TAX COMPLIANCE IN THE 
              CONSTRUCTION INDUSTRY.

    (a) Enforcement Actions.--The Secretary of the Treasury shall 
initiate an enforcement initiative aimed at increasing tax compliance 
in the construction industry. Measures taken to implement this 
initiative shall include:
            (1) Consultations with industry experts and leaders on the 
        scope and priorities of this initiative, including the 
        Secretary of Labor, State government officials, the General 
        Accountability Office, leading private sector construction 
        organizations, and labor organizations involved in the 
        construction industry.
            (2) Targeted tax audits of major construction contractors 
        that the Secretary finds reason to believe may not be in 
        compliance with applicable Federal tax laws.
            (3) Civil and criminal tax enforcement actions under 
        existing legal authorities.
            (4) Educational efforts aimed at entities in the 
        construction industry to increase voluntary tax compliance.
    (b) Authority To Issue Guidance Clarifying Employment Status for 
Purposes of Employment Taxes.--
            (1) In general.--Notwithstanding any other provision of law 
        including section 530 of the Revenue Act of 1978, the Secretary 
        shall promulgate rules and issue guidance to reclassify 
        individuals who are not currently being treated as employees 
        consistent with the proper classification of employees under 
        common law standards within the construction industry.
            (2) Restriction to construction industry.--Any rules or 
        guidance under paragraph (1) shall apply only with respect to 
        services provided within the construction industry.
            (3) Effective date.--Any rules or guidance under paragraph 
        (1) shall not take effect before the date which is 180 days 
        after the date of the enactment of this Act.
    (c) Resources.--The Secretary shall reassign personnel and 
resources from other activities to carry out this Act.
    (d) Oversight and Review.--
            (1) Annual reports by treasury.--The Secretary shall submit 
        an annual written report to the Committee on Ways and Means of 
        the House of Representatives and the Committee on Finance of 
        the Senate regarding the implementation of this Act together 
        with any recommendations for further action by Congress which 
        would be consistent with the purposes of this Act.
            (2) Study and report by comptroller general.--The 
        Comptroller General of the United States shall conduct a 
        comprehensive study of the various forms of tax fraud, 
        including employee misclassification, in the construction 
        industry, efforts to combat such fraud, and recommendations for 
        further action. Not later than June 30, 2017, the Comptroller 
        General shall submit a written report to the Committee on Ways 
        and Means of the House of Representatives and the Committee on 
        Finance of the Senate detailing the results of such study.
    (e) Definitions.--For purposes of this section--
            (1) Construction industry.--The term ``construction 
        industry'' means all general contractors and operative builders 
        primarily engaged in the remodeling, addition, or construction 
        of residential, farm, industrial, commercial, or other 
        buildings including wharves or other structures attached to 
        land.
            (2) Secretary of the treasury.--The terms ``Secretary of 
        the Treasury'' and ``Secretary'' mean the Secretary of the 
        Treasury or the Secretary's designee.
    (f) Termination.--This section, and any rules promulgated or 
guidance issued under subsection (b), shall cease to have any force or 
effect after September 30, 2021.
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