[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4408 Introduced in House (IH)]







105th CONGRESS
  2d Session
                                H. R. 4408

 To amend the Internal Revenue Code of 1986 to provide that tips shall 
             not be subject to income or employment taxes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             August 5, 1998

  Mr. Hunter 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 that tips shall 
             not be subject to income or employment taxes.

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

SECTION 1. TIPS NOT SUBJECT TO INCOME OR EMPLOYMENT TAXES.

    (a) In General.--Section 102 of the Internal Revenue Code of 1986 
(relating to gifts and inheritances) is amended by adding at the end 
the following new subsection:
    ``(d) Tips.--
            ``(1) In general.--For purposes of subsection (a), tips 
        shall be treated as property transferred by gift.
            ``(2) Employee taxable on at least minimum wage.--Paragraph 
        (1) shall not apply to tips received by an employee during any 
        month to the extent that such tips--
                    ``(A) are deemed to have been paid by the employer 
                to the employee pursuant to section 3121(q) (without 
                regard to whether such tips are reported under section 
                6053), and
                    ``(B) do not exceed the excess of--
                            ``(i) the minimum wage rate applicable to 
                        such individual under section 6(a)(1) of the 
                        Fair Labor Standards Act of 1938 (determined 
                        without regard to section 3(m) of such Act), 
                        over
                            ``(ii) the amount of the wages (excluding 
                        tips) paid by the employer to the employee 
                        during such month.''
    (b) Exclusion From Social Security Taxes.--
            (1) Paragraph (12) of section 3121(a) of such Code is 
        amended to read as follows:
            ``(12)(A) tips paid in any medium other than cash;
            ``(B) cash tips received by an employee in any calendar 
        month in the course of his employment by an employer unless the 
        amount of such cash tips is $20 or more and then only to the 
        extent of the excess referred to in section 102(d)(2)(B) for 
        such month;''.
            (2) Paragraph (10) of section 209(a) of the Social Security 
        Act is amended to read as follows:
            ``(10)(A) tips paid in any medium other than cash;
            ``(B) cash tips received by an employee in any calendar 
        month in the course of his employment by an employer unless the 
        amount of such cash tips is $20 or more and then only to the 
        extent of the excess referred to in section 102(d)(2)(B) of the 
        Internal Revenue Code of 1986 for such month;''.
            (3) Paragraph (3) of section 3231(e) of such Code is 
        amended to read as follows:
            ``(3) Solely for purposes of the taxes imposed by section 
        3201 and other provisions of this chapter insofar as they 
        relate to such taxes, the term `compensation' also includes 
        cash tips received by an employee in any calendar month in the 
        course of his employment by an employer if the amount of such 
        cash tips is $20 or more and then only to the extent of the 
        excess referred to in section 102(d)(2)(B) for such month.''.
    (c) Exclusion From Unemployment Compensation Taxes.--Subsection (s) 
of section 3306 of such Code is amended to read as follows:
    ``(s) Tips Not Treated as Wages.--For purposes of this chapter, the 
term `wages' shall include tips received in any month only to the 
extent includible in gross income under section 102(d)(2) for such 
month.''
    (d) Exclusion From Wage Withholding.--Paragraph (16) of section 
3401(a) of such Code is amended to read as follows:
            ``(16)(A) as tips in any medium other than cash;
            ``(B) as cash tips to an employee in any calendar month in 
        the course of his employment by an employer unless the amount 
        of such cash tips is $20 or more and then only to the extent of 
        the excess referred to in section 102(d)(2)(B) for such 
        month;''
    (e) Conforming Amendment.--Sections 32(c)(2)(A)(i) and 220(b)(4)(A) 
of such Code are each amended by striking ``tips'' and inserting ``tips 
(to the extent includible in gross income under section 102(d)(2))''.
    (f) Effective Date.--The amendments made by this section shall 
apply to tips received after the calendar month which includes the date 
of the enactment of this Act.
                                 <all>