[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 2882 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 2882

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 SENATE OF THE UNITED STATES

                           December 15, 2009

   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 Finance

_______________________________________________________________________

                                 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 2009''.

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:
    ``(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).
    ``(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.''.
    (b) Payments for Property and Other Gross Proceeds.--Subsection (a) 
of section 6041 of the Internal Revenue Code of 1986 is amended--
            (1) by inserting ``amounts in consideration for property,'' 
        after ``wages,'',
            (2) by inserting ``gross proceeds,'' after ``emoluments, or 
        other'', and
            (3) by inserting ``gross proceeds,'' after ``setting forth 
        the amount of such''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 2011.

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 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, if--
                    ``(A) the controlling facts and circumstances that 
                formed the basis of a determination of employment 
                status have changed or were misrepresented by the 
                taxpayer, or
                    ``(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.
            ``(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) 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--
                    ``(A) seek to obtain from such individual 
                information relating to the individual's performance of 
                services for the taxpayer, and
                    ``(B) provide written notice to the individual 
                detailing any written determination of the individual's 
                status for employment tax purposes.
    ``(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'', and
                    (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, 2009.
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