II 110th CONGRESS 1st Session S. 1849 IN THE SENATE OF THE UNITED STATES July 23, 2007 Mr. Smith introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to clarify that wages paid to unauthorized aliens may not be deducted from gross income, and for other purposes.

1.

Short title

This Act may be cited as the Lawful Worker Tax Deduction Act.

2.

Clarification that wages paid to unauthorized aliens may not be deducted from gross income

(a)

In general

Subsection (c) of section 162 of the Internal Revenue Code of 1986 (relating to illegal bribes, kickbacks, and other payments) is amended by adding at the end the following new paragraph: (4)

Wages paid to or on behalf of unauthorized aliens

(A)

In general

No deduction shall be allowed under subsection (a) for any wage paid to or on behalf of an unauthorized alien, as defined under section 274A(h)(3) of the Immigration and Nationality Act (8 U.S.C. 1324a(h)(3)). (B)

Wages

For the purposes of this paragraph, the term wages means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash. (C)

Safe Harbor

If a person or other entity is participating in the basic pilot program described in section 403 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (8 U.S.C. 1324a note) and obtains confirmation of identity and employment eligibility in compliance with the terms and conditions of the program with respect to the hiring (or recruitment or referral) of an employee, subparagraph (A) shall not apply with respect to wages paid to such employee. . (b)

6-year limitation on assessment and collection

Subsection (c) of section 6501 of such Code (relating to exceptions) is amended by adding at the end the following new paragraph: (11)

Deduction claimed for wages paid to unauthorized aliens

In the case of a return of tax on which a deduction is shown in violation of section 162(c)(4), any tax under chapter 1 may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return was filed. . (c)

Use of documentation for enforcement purposes

Section 274A of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 is amended— (1)in subparagraph (b)(5), by inserting , section 162(c)(4) of the Internal Revenue Code of 1986, after enforcement of this chapter; (2)in subparagraph (d)(2)(F), by inserting , section 162(c)(4) of the Internal Revenue Code of 1986, after enforcement of this chapter; and (3)in subparagraph (d)(2)(G), by inserting section 162(c)(4) of the Internal Revenue Code of 1986 or after or enforcement of. (d)

Availability of information

The Commissioner of Social Security shall make available to the Commissioner of Internal Revenue any information related to the investigation and enforcement of section 162(c)(4) of the Internal Revenue Code of 1986, including any no-match letter and any information in the suspense earnings file. (e)

Effective date

(1)Except as provided in paragraph (2), this Act and the amendments made by this Act shall take effect on the date of the enactment of this Act. (2)The amendments made by subsections (a) and (b) shall apply to taxable years beginning after December 31, 2007.