[Congressional Record Volume 145, Number 20 (Thursday, February 4, 1999)]
[Senate]
[Pages S1265-S1266]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CLELAND:
  S. 369. A bill to provide States with the authority to permit certain 
employers of domestic workers to make annual wage reports; to the 
Committee on Finance.


                            tax legislation

   Mr. CLELAND. Mr. President, today I am proud to introduce 
legislation to remove a tax reporting burden currently imposed on 
employers of domestic workers. This bill authorizes states to permit 
certain employers of domestic workers to make annual wage reports. I am 
pleased to report that this provision is also included as Section 405 
of S. 331, the Work Incentives Improvement Act of 1999.
  In 1994, Congress approved important legislation reforming the 
imposition of Social Security and Medicare taxes on domestic employees 
(the so-called ``nanny tax''). These new rules introduced more 
rationality into the tax system, and reduced the reporting requirements 
of domestic employers. Unfortunately, the legislation did not go as far 
as many had intended. To this end, I am asking you to co-sponsor my 
legislation which will help relieve households of certain filing 
requirements.
  The Social Security Domestic Employment Reform Act of 1994 (P.L. 103-
387) aimed to ease reporting requirements. Under the Act, domestic 
employers no longer need to file quarterly returns regarding Social 
Security and Medicare taxes nor the annual federal unemployment tax 
(FUTA) return. Rather, all federal reporting is now consolidated on an 
annual Schedule H filed at the same time as the employer's personal 
income tax return.
  Nevertheless, the goal of the 1994 Act--to substantially reduce 
reporting requirements for domestic employers--has not been fully 
accomplished for employers who endeavor to comply with all aspects of 
the law. Under federal law, a state labor commissioner still may not 
authorize annual rather than quarterly filing of state employment 
taxes. The Deficit Reduction Act of 1984 compels employers to report 
wages quarterly to the state. This Act requires quarterly reporting in 
order to make information more accessible to state agencies that 
investigate unemployment claims. However, the burden of this provision 
far outweighs its benefit. The number of household employer tax filings 
is relatively minuscule. Representatives from the Georgia Department of 
Labor and their counterparts in several other states are confident that 
the investigation of unemployment claims will not be hindered by annual 
rather than quarterly reporting requirements.
  Under FUTA, employers make quarterly reports and payments to state 
unemployment agencies, then pay an additional sum of federal tax (now 
once a year, as part of Schedule H). While the liability of employers 
for domestic employees was changed for Social Security and Medicare 
purposes, to exclude workers under the age of 18 and workers earning 
less than $1,000 per year, the employers' responsibility under FUTA was 
not changed. More importantly, the 1994 Act did not eliminate the 
requirement that employers must report employee wages quarterly to the 
states.
  Congress was not unmindful of the relationship of FUTA to Social 
Security taxes at the time it passed the 1994 Act. Besides eliminating 
the FUTA return for domestic employers, the Act also contained 
language, which authorizes the Secretary of the Treasury to enter 
agreements with the states to permit the federal government to collect 
unemployment taxes on behalf of the states, along with all other 
domestic employee taxes, once a year. That statute, if used, would 
eliminate the need for domestic employers to report to state 
unemployment agencies. To date, no state has entered such an agreement. 
This is because the Social Security Act did not alter the quarterly 
reporting requirement.
  In short, the federal requirement of quarterly state employment tax 
reports for purely domestic employers should be eliminated. To ease the 
reporting burden on domestic employers, my legislation proposes that 
states be allowed to provide for annual filing of household employment 
taxes. Please join me in the effort to finish the job of rationalizing 
the taxpayer obligations for domestic employment taxes. I ask unanimous 
consent that a copy of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 369

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

[[Page S1266]]

     SECTION 1. AUTHORIZATION FOR STATE TO PERMIT ANNUAL WAGE 
                   REPORTS.

       (a) In General.--Section 1137(a)(3) of the Social Security 
     Act (42 U.S.C. 1320b-7(a)(3)) is amended by inserting before 
     the semicolon the following: ``, and except that in the case 
     of wage reports with respect to domestic service employment, 
     a State may permit employers (as so defined) that make 
     returns with respect to such service on a calendar year basis 
     pursuant to section 3510 of the Internal Revenue Code of 1986 
     to make such reports on an annual basis''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to wage reports required to be submitted on and 
     after the date of enactment of this Act.
                                 ______