S 2882 ISCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to modify the rules relating to the treatment of individuals as independent contractors or employees, and for other purposes.CommentsClose CommentsPermalink

December 15, 2009CommentsClose CommentsPermalink

Mr. KERRY (for himself, Mr. DURBIN, Mr. HARKIN, Mr. SCHUMER, Mr. MENENDEZ, Mr. BROWN, and Mr. KIRK) introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to modify the rules relating to the treatment of individuals as independent contractors or employees, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Taxpayer Responsibility, Accountability, and Consistency Act of 2009’.CommentsClose CommentsPermalink

SEC. 2. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.

(a) In General- Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:CommentsClose CommentsPermalink





‘(h) Application to Corporations- Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation that is not an organization exempt from tax under section 501(a).CommentsClose CommentsPermalink





‘(i) Regulations- The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.’.CommentsClose CommentsPermalink





(b) Payments for Property and Other Gross Proceeds- Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended--CommentsClose CommentsPermalink





(1) by inserting ‘amounts in consideration for property,’ after ‘wages,’,CommentsClose CommentsPermalink





(2) by inserting ‘gross proceeds,’ after ‘emoluments, or other’, andCommentsClose CommentsPermalink





(3) by inserting ‘gross proceeds,’ after ‘setting forth the amount of such’.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to payments made after December 31, 2011.CommentsClose CommentsPermalink

SEC. 3. DETERMINATION OF ELIGIBILITY FOR SAFE HARBOR TREATMENT OF INDIVIDUALS AS NON-EMPLOYEES FOR PURPOSES OF EMPLOYMENT TAXES.

(a) In General- Chapter 25 of the Internal Revenue Code of 1986 (relating to general provisions relating to employment taxes) is amended by adding at the end the following new section:CommentsClose CommentsPermalink

‘SEC. 3511. SAFE HARBOR.

‘(a) Termination of Certain Employment Tax Liability-CommentsClose CommentsPermalink





‘(1) IN GENERAL- If--CommentsClose CommentsPermalink





‘(A) for purposes of employment taxes, the taxpayer did not treat an individual as an employee for any period, andCommentsClose CommentsPermalink





‘(B) in the case of periods after December 31, 1978, 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,CommentsClose CommentsPermalink





then, for purposes of applying such taxes for such period 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. This paragraph shall not apply with respect to an individual for any periods beginning after the date of notice of a determination that such individual should be treated as an employee of the taxpayer.CommentsClose CommentsPermalink





‘(2) STATUTORY STANDARDS FOR SATISFYING THE REQUIREMENTS OF PARAGRAPH (1)- For purposes of paragraph (1), a taxpayer shall be treated as having a reasonable basis for not treating an individual as an employee only if--CommentsClose CommentsPermalink





‘(A) the taxpayer’s treatment of such individual was in reasonable reliance on--CommentsClose CommentsPermalink





‘(i) a written determination issued to the taxpayer addressing the employment status of such individual or another individual holding a substantially similar position with the taxpayer, orCommentsClose CommentsPermalink





‘(ii) a concluded examination (for employment tax purposes) of whether such individual (or another individual holding a substantially similar position) should be treated as an employee of the taxpayer, with respect to which there was no determination that such individual (or another individual holding a substantially similar position) should be treated as an employee, andCommentsClose CommentsPermalink





‘(B) the taxpayer (or a predecessor) has not treated any other individual holding a substantially similar position as an employee for purposes of employment taxes for any period beginning after December 31, 1977.CommentsClose CommentsPermalink





‘(b) Definitions- For purposes of this section--CommentsClose CommentsPermalink





‘(1) EMPLOYMENT TAX- The term ‘employment tax’ means any tax imposed by this subtitle.CommentsClose CommentsPermalink





‘(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).CommentsClose CommentsPermalink





‘(c) Special Rules for Application of Section-CommentsClose CommentsPermalink





‘(1) NOTICE OF AVAILABILITY OF SECTION- An officer or employee of the Internal Revenue Service shall, before or at the commencement of any examination 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.CommentsClose CommentsPermalink





‘(2) RULES RELATING TO STATUTORY STANDARDS- For purposes of subsection (a)(2), with respect to any period beginning after the date of the enactment of this paragraph, a taxpayer may not rely on an examination commenced, or a written determination issued, if--CommentsClose CommentsPermalink





‘(A) the controlling facts and circumstances that formed the basis of a determination of employment status have changed or were misrepresented by the taxpayer, orCommentsClose CommentsPermalink





‘(B) the Secretary subsequently issues contrary guidance relating to the determination of employment status that has bearing on the facts and circumstances that formed the basis of a determination of employment status.CommentsClose CommentsPermalink





‘(3) SUBSTANTIALLY SIMILAR POSITION- For purposes of this section, the determination as to whether an individual holds a position substantially similar to a position held by another individual shall be made by the Secretary in a manner consistent with the Fair Labor Standards Act of 1938.CommentsClose CommentsPermalink





‘(d) Burden of Proof- A taxpayer must establish entitlement to relief under this section by a preponderance of the evidence.CommentsClose CommentsPermalink





‘(e) Petitions for Review of Status-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Under procedures established by the Secretary not later than 1 year after the date of the enactment of this section, any individual who performs services for a taxpayer may petition (either personally or through a designated representative or attorney) for a determination of the individual’s status for employment tax purposes.CommentsClose CommentsPermalink





‘(2) ADMINISTRATIVE PROCEDURES- The procedures established under paragraph (1) shall provide for--CommentsClose CommentsPermalink





‘(A) a determination of status not later than 90 days after the filing of the petition with respect to employment in any industry (such as the construction industry) in which employment is transient, casual, or seasonal, andCommentsClose CommentsPermalink





‘(B) an administrative appeal of any determination that an individual is not an employee of the taxpayer.CommentsClose CommentsPermalink





‘(3) DUTY TO SEEK SERVICE PROVIDER INFORMATION- In the case of a request by a taxpayer for a determination of an individual’s status for employment tax purposes, the Secretary shall, to the extent practicable--CommentsClose CommentsPermalink





‘(A) seek to obtain from such individual information relating to the individual’s performance of services for the taxpayer, andCommentsClose CommentsPermalink





‘(B) provide written notice to the individual detailing any written determination of the individual’s status for employment tax purposes.CommentsClose CommentsPermalink





‘(f) Results of Misclassification Determinations- In any case in which the Secretary determines that a taxpayer has misclassified an individual as not an employee for employment tax purposes, the Secretary shall inform the Secretary of Labor about such misclassification and notify the individual of any eligibility for the refund of self-employment taxes under chapter 2.CommentsClose CommentsPermalink





‘(g) Regulations- The Secretary shall, not later than 1 year after the date of the enactment of this section, prescribe such regulations as may be necessary and appropriate to carry out the purposes of this section.’.CommentsClose CommentsPermalink





(b) Conforming Amendments-CommentsClose CommentsPermalink





(1) Paragraph (2) of section 7436(a) of such Code is amendment by striking ‘section 530 of the Revenue Act of 1978’ and inserting ‘section 3511’.CommentsClose CommentsPermalink





(2) The table of sections for chapter 25 of such Code is amended by adding at the end the following new item:CommentsClose CommentsPermalink





‘Sec. 3511. Safe harbor.’.CommentsClose CommentsPermalink





(c) Termination of Section 530 of the Revenue Act of 1978- Section 530 of the Revenue Act of 1978 shall not apply to services rendered more than 1 year after the date of the enactment of this Act.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply to services rendered more than 1 year after the date of the enactment of this Act.CommentsClose CommentsPermalink

SEC. 4. ANNUAL REPORTS ON WORKER MISCLASSIFICATION.

The Secretary of the Treasury shall issue an annual report on worker misclassification. Such report shall include the following:CommentsClose CommentsPermalink





(1) Information on the number and type of enforcement actions against, and examinations of, employers who have misclassified workers.CommentsClose CommentsPermalink





(2) Relief obtained as a result of such actions against, and examinations of, employers who have misclassified workers.CommentsClose CommentsPermalink





(3) An overall estimate of the number of employers misclassifying workers, the number of workers affected, and the industries involved.CommentsClose CommentsPermalink





(4) The impact of such misclassification on the Federal tax system.CommentsClose CommentsPermalink





(5) Information on the outcomes of the petitions filed under section 3511(e) of the Internal Revenue Code of 1986.CommentsClose CommentsPermalink

SEC. 5. INCREASE IN INFORMATION RETURN PENALTIES.

(a) Failure To File Correct Information Returns-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 6721(a)(1) of the Internal Revenue Code of 1986 is amended--CommentsClose CommentsPermalink





(A) by striking ‘$50’ and inserting ‘$250’, andCommentsClose CommentsPermalink





(B) by striking ‘$250,000’ and inserting ‘$3,000,000’.CommentsClose CommentsPermalink





(2) REDUCTION WHERE CORRECTION IN SPECIFIED PERIOD-CommentsClose CommentsPermalink





(A) CORRECTION WITHIN 30 DAYS- Section 6721(b)(1) of such Code is amended--CommentsClose CommentsPermalink





(i) by striking ‘$15’ and inserting ‘$50’,CommentsClose CommentsPermalink





(ii) by striking ‘$50’ and inserting ‘$250’, andCommentsClose CommentsPermalink





(iii) by striking ‘$75,000’ and inserting ‘$500,000’.CommentsClose CommentsPermalink





(B) FAILURES CORRECTED ON OR BEFORE AUGUST 1- Section 6721(b)(2) of such Code is amended--CommentsClose CommentsPermalink





(i) by striking ‘$30’ and inserting ‘$100’,CommentsClose CommentsPermalink





(ii) by striking ‘$50’ and inserting ‘$250’, andCommentsClose CommentsPermalink





(iii) by striking ‘$150,000’ and inserting ‘$1,500,000’.CommentsClose CommentsPermalink





(3) LOWER LIMITATION FOR PERSONS WITH GROSS RECEIPTS OF NOT MORE THAN $5,000,000- Section 6721(d)(1) of such Code is amended--CommentsClose CommentsPermalink





(A) in subparagraph (A)--CommentsClose CommentsPermalink





(i) by striking ‘$100,000’ and inserting ‘$1,000,000’, andCommentsClose CommentsPermalink





(ii) by striking ‘$250,000’ and inserting ‘$3,000,000’,CommentsClose CommentsPermalink





(B) in subparagraph (B)--CommentsClose CommentsPermalink





(i) by striking ‘$25,000’ and inserting ‘$175,000’, andCommentsClose CommentsPermalink





(ii) by striking ‘$75,000’ and inserting ‘$500,000’, andCommentsClose CommentsPermalink





(C) in subparagraph (C)--CommentsClose CommentsPermalink





(i) by striking ‘$50,000’ and inserting ‘$500,000’, andCommentsClose CommentsPermalink





(ii) by striking ‘$150,000’ and inserting ‘$1,500,000’.CommentsClose CommentsPermalink





(4) PENALTY IN CASE OF INTENTIONAL DISREGARD- Section 6721(e) of such Code is amended--CommentsClose CommentsPermalink





(A) by striking ‘$100’ in paragraph (2) and inserting ‘$500’, andCommentsClose CommentsPermalink





(B) by striking ‘$250,000’ in paragraph (3)(A) and inserting ‘$3,000,000’.CommentsClose CommentsPermalink





(b) Failure To Furnish Correct Payee Statements-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 6722(a) of such Code is amended--CommentsClose CommentsPermalink





(A) by striking ‘$50’ and inserting ‘$250’, andCommentsClose CommentsPermalink





(B) by striking ‘$100,000’ and inserting ‘$1,000,000’.CommentsClose CommentsPermalink





(2) PENALTY IN CASE OF INTENTIONAL DISREGARD- Section 6722(c) of such Code is amended--CommentsClose CommentsPermalink





(A) by striking ‘$100’ in paragraph (1) and inserting ‘$500’, andCommentsClose CommentsPermalink





(B) by striking ‘$100,000’ in paragraph (2)(A) and inserting ‘$1,000,000’.CommentsClose CommentsPermalink





(c) Failure To Comply With Other Information Reporting Requirements- Section 6723 of such Code is amended--CommentsClose CommentsPermalink





(1) by striking ‘$50’ and inserting ‘$250’, andCommentsClose CommentsPermalink





(2) by striking ‘$100,000’ and inserting ‘$1,000,000’.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply with respect to information returns required to be filed after December 31, 2009.CommentsClose CommentsPermalink