[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5804 Introduced in House (IH)]
110th CONGRESS
2d Session
H. R. 5804
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 15, 2008
Mr. McDermott (for himself, Mr. Tierney, Mr. Neal of Massachusetts, Mr.
Stark, Mr. Lewis of Georgia, Mr. Doggett, Mr. Emanuel, Mr. Pascrell,
Ms. Berkley, Mr. Crowley, Ms. Schwartz, Mr. Davis of Alabama, Ms.
DeLauro, Mr. George Miller of California, Ms. Linda T. Sanchez of
California, Mr. Hare, Ms. Sutton, Mr. Honda, Mr. Higgins, Mr. Brady of
Pennsylvania, Mr. Grijalva, Mr. Cummings, Mr. Kagen, and Mr. Levin)
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 modify the rules relating
to the treatment of individuals as independent contractors or
employees, 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 ``Taxpayer Responsibility,
Accountability, and Consistency Act of 2008''.
SEC. 2. INFORMATION REPORTING FOR PAYMENTS TO CORPORATIONS.
(a) In General.--Section 6041 of the Internal Revenue Code of 1986
(relating to information at source) is amended by adding at the end the
following new subsection:
``(h) Payments to Corporations.--
``(1) In general.--Notwithstanding any regulations
prescribed by the Secretary before the date of the enactment of
this subsection, subsection (a) shall apply to payments made to
a corporation.
``(2) Exception.--Paragraph (1) shall not apply to payments
made to a hospital or extended care facility described in
section 501(c)(3) which is exempt from taxation under section
501(a) or to a hospital or extended care facility owned and
operated by the United States, a State, the District of
Columbia, a possession of the United States, or a political
subdivision, agency or instrumentality of any of the
foregoing.''.
(b) Effective Date.--The amendment made by this section shall apply
to payments made more than 1 year after the date of the enactment of
this Act.
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:
``SEC. 3511. SAFE HARBOR.
``(a) Termination of Certain Employment Tax Liability.--
``(1) In general.--If--
``(A) for purposes of employment taxes, the
taxpayer did not treat an individual as an employee for
any period, and
``(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,
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.
``(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--
``(A) the taxpayer's treatment of such individual
was in reasonable reliance on--
``(i) a written determination (as defined
in section 6110(b)(1)) issued to the taxpayer
addressing the employment status of such
individual or another individual holding a
substantially similar position with the
taxpayer, or
``(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, and
``(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.
``(b) Definitions.--For purposes of this section--
``(1) Employment tax.--The term `employment tax' means any
tax imposed by this subtitle.
``(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).
``(c) Special Rules for Application of Section.--
``(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.
``(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, more than 7 years before the beginning of
such period.
``(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.
``(d) Burden of Proof.--A taxpayer must establish entitlement to
relief under this section by a preponderance of the evidence.
``(e) Petitions for Review of Status.--
``(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.
``(2) Administrative procedures.--The procedures
established under paragraph (1) shall provide for--
``(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, and
``(B) an administrative appeal of any determination
that an individual is not an employee of the taxpayer.
``(3) Prohibition against retaliation.--
``(A) In general.--No taxpayer may discharge an
individual, refuse to contract with an individual, or
otherwise discriminate against an individual with
respect to compensation, terms, conditions, or
privileges of the services provided by the individual
because the individual (or any designated
representative or attorney on behalf of such
individual) filed a petition under paragraph (1).
``(B) Rights retained by individual.--Nothing in
this paragraph shall be deemed to diminish the rights,
privileges, or remedies of any individual under any
Federal or State law, or under any collective
bargaining agreement.
``(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.
``(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.''.
(b) Conforming Amendments.--
(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''.
(2) The table of sections for chapter 25 of such Code is
amended by adding at the end the following new item:
``Sec. 3511. Safe harbor.''.
(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.
(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.
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:
(1) Information on the number and type of enforcement
actions against, and examinations of, employers who have
misclassified workers.
(2) Relief obtained as a result of such actions against,
and examinations of, employers who have misclassified workers.
(3) An overall estimate of the number of employers
misclassifying workers, the number of workers affected, and the
industries involved.
(4) The impact of such misclassification on the Federal tax
system.
(5) Information on the outcomes of the petitions filed
under section 3511(e) of the Internal Revenue Code of 1986.
SEC. 5. INCREASE IN INFORMATION RETURN PENALTIES.
(a) Failure To File Correct Information Returns.--
(1) In general.--Section 6721(a)(1) of the Internal Revenue
Code of 1986 is amended--
(A) by striking ``$50'' and inserting ``$250'', and
(B) by striking ``$250,000'' and inserting
``$3,000,000''.
(2) Reduction where correction in specified period.--
(A) Correction within 30 days.--Section 6721(b)(1)
of such Code is amended--
(i) by striking ``$15'' and inserting
``$50'',
(ii) by striking ``$50'' and inserting
``$250'', and
(iii) by striking ``$75,000'' and inserting
``$500,000''.
(B) Failures corrected on or before august 1.--
Section 6721(b)(2) of such Code is amended--
(i) by striking ``$30'' and inserting
``$100'',
(ii) by striking ``$50'' and inserting
``$250'', and
(iii) by striking ``$150,000'' and
inserting ``$1,500,000''.
(3) Lower limitation for persons with gross receipts of not
more than $5,000,000.--Section 6721(d)(1) of such Code is
amended--
(A) in subparagraph (A)--
(i) by striking ``$100,000'' and inserting
``$1,000,000'', and
(ii) by striking ``$250,000'' and inserting
``$3,000,000'',
(B) in subparagraph (B)--
(i) by striking ``$25,000'' and inserting
``$175,000'', and
(ii) by striking ``$75,000'' and inserting
``$500,000'', and
(C) in subparagraph (C)--
(i) by striking ``$50,000'' and inserting
``$500,000'', and
(ii) by striking ``$150,000'' and inserting
``$1,500,000''.
(4) Penalty in case of intentional disregard.--Section
6721(e) of such Code is amended--
(A) by striking ``$100'' in paragraph (2) and
inserting ``$500'',
(B) by striking ``$250,000'' in paragraph (3)(A)
and inserting ``$3,000,000''.
(b) Failure To Furnish Correct Payee Statements.--
(1) In general.--Section 6722(a) of such Code is amended--
(A) by striking ``$50'' and inserting ``$250'', and
(B) by striking ``$100,000'' and inserting
``$1,000,000''.
(2) Penalty in case of intentional disregard.--Section
6722(c) of such Code is amended--
(A) by striking ``$100'' in paragraph (1) and
inserting ``$500'', and
(B) by striking ``$100,000'' in paragraph (2)(A)
and inserting ``$1,000,000''.
(c) Failure To Comply With Other Information Reporting
Requirements.--Section 6723 of such Code is amended--
(1) by striking ``$50'' and inserting ``$250'', and
(2) by striking ``$100,000'' and inserting ``$1,000,000''.
(d) Effective Date.--The amendments made by this section shall
apply with respect to information returns required to be filed after
December 31, 2008.
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