New Economy Works to Guarantee Independence and Growth Act of 2017 or the NEW GIG Act of 2017
This bill amends the Internal Revenue Code to establish a test for determining if a service provider should be classified as an independent contractor rather than as an employee for tax purposes.
If the requirements of the test are met, the provider may not be treated as an employee, the recipient or any payor may not be treated as an employer, and compensation for the service may not be treated as paid or received with respect to employment.
The factors of the test include:
The bill also: (1) sets forth withholding and reporting requirements for service recipients who meet the requirements of the test, and (2) allows service providers to petition the U.S. Tax Court for a determination of employment status.
[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4165 Introduced in House (IH)]
<DOC>
115th CONGRESS
1st Session
H. R. 4165
To amend the Internal Revenue Code of 1986 to provide a safe harbor for
determinations of worker classification, to require increased
reporting, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 27, 2017
Mr. Rice of South Carolina 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 provide a safe harbor for
determinations of worker classification, to require increased
reporting, 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.
This Act may be cited as the ``New Economy Works to Guarantee
Independence and Growth Act of 2017'' or the ``NEW GIG Act of 2017''.
SEC. 2. DETERMINATION OF WORKER CLASSIFICATION.
(a) In General.--Chapter 79 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new section:
``SEC. 7706. DETERMINATION OF WORKER CLASSIFICATION.
``(a) In General.--For purposes of this title (and notwithstanding
any provision of this title not contained in this section to the
contrary), if the requirements of subsections (b), (c), and (d) are met
with respect to any service performed by a service provider, then with
respect to such service--
``(1) the service provider shall not be treated as an
employee,
``(2) the service recipient shall not be treated as an
employer,
``(3) any payor shall not be treated as an employer, and
``(4) the compensation paid or received for such service
shall not be treated as paid or received with respect to
employment.
``(b) General Service Provider Requirements.--
``(1) In general.--The requirements of this subsection are
met with respect to any service if the service provider
either--
``(A) meets the requirements of paragraph (2) with
respect to such service, or
``(B) in the case of a service provider engaged in
the trade or business of selling (or soliciting the
sale of) goods or services, meets the requirements of
paragraph (3) with respect to such service.
``(2) General requirements.--
``(A) In general.--The requirements of this
paragraph are met with respect to any service if the
service provider, in connection with performing the
service--
``(i) incurs expenses--
``(I) which are deductible under
section 162, and
``(II) a significant portion of
which are not reimbursed,
``(ii) agrees to perform the service for a
particular amount of time, to achieve a
specific result, or to complete a specific
task, and
``(iii) satisfies not less than one of the
factors described in subparagraph (B).
``(B) Factors.--The factors described in this
subparagraph are the following:
``(i) The service provider has a
significant investment in assets or training
which are applicable to the service performed.
``(ii) The service provider is not required
to perform services exclusively for the service
recipient or payor.
``(iii) The service provider has not been
treated as an employee by the service recipient
or payor during the 1-year period ending with
the date of the commencement of services under
the contract described in subsection (d).
``(iv) The service provider is not
compensated on a basis which is tied primarily
to the number of hours actually worked.
``(3) Alternative requirements with respect to sales
persons.--In the case of a service provider engaged in the
trade or business of selling (or soliciting the sale of) goods
or services, the requirements of this paragraph are met with
respect to any service provided in the ordinary course of such
trade or business if--
``(A) the service provider is compensated primarily
on a commission basis, and
``(B) substantially all the compensation for such
service is directly related to sales of goods or
services rather than to the number of hours worked.
``(c) Place of Business or Own Equipment Requirement.--The
requirement of this subsection is met with respect to any service if
the service provider--
``(1) has a principal place of business,
``(2) does not provide the service primarily in the service
recipient's place of business,
``(3) pays a fair market rent for use of the service
recipient's place of business, or
``(4) provides the service primarily using equipment
supplied by the service provider.
``(d) Written Contract Requirement.--The requirements of this
subsection are met with respect to any service if such service is
performed pursuant to a written contract between the service provider
and the service recipient (or payor) which meets the following
requirements:
``(1) The contract includes each of the following:
``(A) The service provider's name, taxpayer
identification number, and address.
``(B) A statement that the service provider will
not be treated as an employee with respect to the
services provided pursuant to the contract for purposes
of this title.
``(C) A statement that the service recipient (or
the payor) will withhold upon and report to the
Internal Revenue Service the compensation payable
pursuant to the contract consistent with the
requirements of this title.
``(D) A statement that the service provider is
responsible for payment of Federal, State, and local
taxes, including self-employment taxes, on compensation
payable pursuant to the contract.
``(E) A statement that the contract is intended to
be considered a contract described in this subsection.
``(2) The term of the contract does not exceed 2 years. The
preceding sentence shall not prevent one or more subsequent
written renewals of the contract from satisfying the
requirements of this subsection if the term of each such
renewal does not exceed 2 years and if the information required
under paragraph (1)(A) is updated in connection with each such
renewal.
``(3) The contract (or renewal) is signed (which may
include signatures in electronic form) by both the service
recipient (or payor) and the service provider not later than
the date on which the aggregate payments made by the service
recipient (or payor) to the service provider exceeds $1,000 for
the year covered by the contract (or renewal).
``(e) Reporting Requirements.--
``(1) In general.--For purposes of making any determination
with respect to the liability of a service recipient or payor
for any tax during any taxable year with respect to a service
provider, the application of this section shall be conditioned
on either the service recipient or the payor satisfying the
reporting requirements applicable to such service recipient or
payor under section 6041(a), 6041A(a), or 6050W with respect to
such service provider for such period.
``(2) Reasonable cause.--For purposes of paragraph (1),
such reporting requirements shall be treated as met if the
failure to satisfy such requirements is due to reasonable cause
and not willful neglect.
``(f) Exception for Services Provided by Owner.--This section shall
not apply with respect to any service provided by a service provider to
a service recipient if the service provider owns any interest in the
service recipient or any payor with respect to the service provided.
The preceding sentence shall not apply in the case of a service
recipient the stock of which is regularly traded on an established
securities market.
``(g) Exception for Personal Services.--
``(1) In general.--This section shall not apply with
respect to any service provided for the personal purposes of
the service recipient.
``(2) Limitation.--Paragraph (1) shall not apply in the
case of any services provided to a service recipient who is not
the payor.
``(h) Limitation on Reclassification by Secretary.--For purposes of
this title--
``(1) Effect of reclassification on service recipients and
payors.--A determination by the Secretary that a service
recipient or a payor should have treated a service provider as
an employee shall be effective with respect to the service
recipient or payor no earlier than the notice date if--
``(A) the service recipient or the payor entered
into a written contract with the service provider which
meets the requirements of subsection (d),
``(B) the service recipient or the payor satisfied
the applicable reporting requirements of section
6041(a), 6041A(a), or 6050W for all relevant taxable
years with respect to the service provider,
``(C) the service recipient or the payor collected
and paid over all applicable taxes imposed under
subtitle C for all relevant taxable years with respect
to the service provider, and
``(D) the service recipient or the payor
demonstrates a reasonable basis for having determined
that the service provider should not be treated as an
employee under this section and that such determination
was made in good faith.
``(2) Effect of reclassification on service providers.--A
determination by the Secretary that a service provider should
have been treated as an employee shall be effective with
respect to the service provider no earlier than the notice date
if--
``(A) the service provider entered into a written
contract with the service recipient or payor which
meets the requirements of subsection (d),
``(B) the service provider satisfied the applicable
reporting requirements of sections 6012(a) and 6017 for
all relevant taxable years with respect to the service
recipient or payor, and
``(C) the service provider demonstrates a
reasonable basis for determining that the service
provider is not an employee under this section and that
such determination was made in good faith.
``(3) Notice date.--For purposes of this subsection, the
term `notice date' means the 30th day after the earliest of--
``(A) the date on which the first letter of
proposed deficiency which allows the service provider,
the service recipient, or the payor an opportunity for
administrative review in the Internal Revenue Service
Office of Appeals is sent,
``(B) the date on which a deficiency notice under
section 6212 is sent, or
``(C) the date on which a notice of determination
under section 7436(b)(2) is sent.
``(4) Reasonable cause exception.--The requirements of
paragraphs (1)(B) and (2)(B) shall be treated as met if the
failure to satisfy such requirements is due to reasonable cause
and not willful neglect.
``(5) No restriction on administrative or judicial
review.--Nothing in this subsection shall be construed as
limiting any provision of law which provides an opportunity for
administrative or judicial review of a determination by the
Secretary.
``(i) Rule of Construction.--Nothing in this section shall be
construed as--
``(1) limiting the ability or right of a service provider,
service recipient, or payor to apply any other provision of
this title, section 530 of the Revenue Act of 1978, or any
common law rules for determining whether an individual is an
employee, or
``(2) establishing a prerequisite for the application of
any provision of law described in paragraph (1).
``(j) Definitions.--For purposes of this section--
``(1) Service provider.--
``(A) In general.--The term `service provider'
means any qualified person who performs service for
another person.
``(B) Qualified person.--The term `qualified
person' means--
``(i) any natural person, or
``(ii) any entity if any of the services
referred to in subparagraph (A) are performed
by one or more natural persons who directly own
interests in such entity.
``(2) Service recipient.--The term `service recipient'
means the person for whom the service provider performs such
service.
``(3) Payor.--The term `payor' means--
``(A) any person, including the service recipient,
who pays the service provider for performing such
service, or
``(B) any third party settlement organization, as
defined in section 6050W(b)(3).
``(k) Regulations.--Notwithstanding section 530(d) of the Revenue
Act of 1978, the Secretary shall issue such regulations as the
Secretary determines are necessary to carry out the purposes of this
section.''.
(b) Withholding by Payor in Case of Certain Persons Classified as
Not Employees.--Section 3402 of the Internal Revenue Code of 1986 is
amended by redesignating subsection (s) as subsection (t) and inserting
after subsection (r) the following new subsection:
``(s) Extension of Withholding to Payments to Certain Persons
Classified as Not Employees.--
``(1) In general.--For purposes of this chapter and so much
of subtitle F as relates to this chapter, compensation paid
pursuant to a contract described in section 7706(d) shall be
treated as if it were a payment of wages by an employer to an
employee.
``(2) Amount withheld.--Except as otherwise provided under
subsection (i), the amount to be deducted and withheld pursuant
to paragraph (1) with respect to compensation paid pursuant to
any such contract during any calendar year shall be an amount
equal to 5 percent of so much of the amount of such
compensation as does not exceed $20,000.''.
(c) Direct Sellers of Promotional Products.--Subsection (b) of
section 3508 is amended--
(1) in paragraph (2)(A)--
(A) in clause (ii), by striking ``or'' at the end;
(B) in clause (iii), by adding ``or'' at the end;
and
(C) by inserting after clause (iii) the following
new clause:
``(iv) is engaged in the trade or business
of selling, or soliciting the sale of,
promotional products from other than a
permanent retail establishment,'';
(2) by redesignating paragraph (3) as paragraph (4); and
(3) by inserting after paragraph (2) the following new
paragraph:
``(3) Promotional product.--For purposes of paragraph
(2)(A)(iv), the term `promotional product' means a tangible
item with permanently marked promotional words, symbols, or art
of the purchaser.''.
(d) Reporting.--
(1) Information at source.--Section 6041 of the Internal
Revenue Code of 1986 is amended--
(A) in subsection (a)--
(i) in the heading, by striking ``$600''
and inserting ``$1,000''; and
(ii) by striking ``$600 or more in any
taxable year'' and inserting ``$1,000 or more
in any taxable year''; and
(B) by adding at the end the following new
subsection:
``(h) Special Rules for Certain Persons Classified as Not
Employees.--
``(1) In general.--In the case of any service recipient or
payor required to make a return under subsection (a) with
respect to compensation to which section 7706(a) applies--
``(A) such return shall include--
``(i) the aggregate amount of such
compensation paid to each person whose name is
required to be included on such return,
``(ii) the aggregate amount deducted and
withheld under section 3402(s) with respect to
such compensation, and
``(iii) an indication of whether a copy of
the contract described in section 7706(d) is on
file with the service recipient or payor, and
``(B) the statement required to be furnished under
subsection (d) shall include the information described
in subparagraph (A) with respect to the service
provider to whom such statement is furnished.
``(2) Definitions.--Terms used in this subsection which are
also used in section 7706 shall have the same meaning as when
used in such section.''.
(2) Returns regarding payments of remuneration for services
and direct sales.--Section 6041A of such Code is amended--
(A) in paragraph (2) of subsection (a), by striking
``$600'' and inserting ``$1,000''; and
(B) by adding at the end the following new
subsection:
``(g) Special Rules for Certain Persons Classified as Not
Employees.--Rules similar to the rules of subsection (h) of section
6041 shall apply for purposes of this section.''.
(3) Returns relating to payments made in settlement of
payment card and third party network transactions.--Section
6050W of such Code is amended--
(A) in subsection (d), by amending paragraph (3) to
read as follows:
``(3) Third party network.--
``(A) In general.--The term `third party payment
network' means any agreement or arrangement--
``(i) which involves the establishment of
accounts with a central organization or
marketplace platform by a substantial number of
persons who--
``(I) are unrelated to such
organization or platform,
``(II) provide goods or services,
and
``(III) have agreed to settle
transactions for the provision of such
goods or services pursuant to such
agreement or arrangement,
``(ii) which provides for standards and
mechanisms for settling such transactions, and
``(iii) which guarantees persons providing
goods or services pursuant to such agreement or
arrangement that such persons will be paid for
providing such goods or services.
``(B) Exception.--The term `third party payment
network' shall not include any agreement or arrangement
which provides for the issuance of payment cards.
``(C) Marketplace platform.--For purposes of
subparagraph (A), the term `marketplace platform' means
any person who--
``(i) operates a digital website or mobile
application that facilitates the provision of
goods or services by providers to recipients,
``(ii) enters into an agreement with each
provider stating that such provider will not be
treated as an employee with respect to such
goods or services,
``(iii) provides standards and mechanisms
for settling such facilitated transactions, and
``(iv) guarantees each provider of goods or
services pursuant to such agreement that the
provider will be paid for such facilitated
transaction.'';
(B) by amending subsection (e) to read as follows:
``(e) Exception for De Minimis Payments by Third Party Settlement
Organizations.--
``(1) In general.--A third party settlement organization
shall be required to report any information under subsection
(a) with respect to third party network transactions of any
participating payee only if the amount which would otherwise be
reported under subsection (a)(2) with respect to such
transactions exceeds $1,000.
``(2) Election to report.--Notwithstanding paragraph (1), a
third party settlement organization may elect to report any
information under subsection (a) with respect to third party
network transactions of any participating payee for which the
amount reported under subsection (a)(2) with respect to such
transactions is equal to or less than $1,000.''; and
(C) in subsection (f)--
(i) in paragraph (1), by striking ``and''
at the end;
(ii) in paragraph (2), by striking the
period at the end and inserting ``, and''; and
(iii) by inserting after paragraph (2) the
following new paragraph:
``(3) the amount, if any, withheld pursuant to section
3402(s).''.
(e) Proceedings for Determination of Employment Status.--Paragraph
(1) of section 7436(b) of the Internal Revenue Code of 1986 is amended
to read as follows:
``(1) Petitioner.--A pleading may be filed under this
section only by--
``(A) the person for whom the services are
performed, or
``(B) any service provider (as defined in section
7706(j)(1)) which the Secretary has determined should
have been treated as an employee.''.
(f) Clerical Amendment.--The table of sections for chapter 79 of
the Internal Revenue Code of 1986 is amended by adding at the end the
following new item:
``Sec. 7706. Determination of worker classification.''.
(g) Effective Date.--The amendments made by this section shall
apply to services performed after December 31, 2017 (and to payments
made for such services after such date).
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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