[Congressional Record Volume 163, Number 194 (Wednesday, November 29, 2017)]
[Senate]
[Pages S7484-S7486]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 1658. Mr. THUNE submitted an amendment intended to be proposed by
him to the bill H.R. 1, to provide for reconciliation pursuant to
titles II and V of the concurrent resolution on the budget for fiscal
year 2018; which was ordered to lie on the table; as follows:
At the appropriate place, insert the following:
SEC. ___. DETERMINATION OF WORKER CLASSIFICATION.
(a) In General.--Chapter 79 is amended by adding at the end
the following new section:
``SEC. 7706. DETERMINATION OF WORKER CLASSIFICATION.
``(a) In General.--For purposes of this title (and
notwithstanding any provision of this title not contained in
this section to the contrary), if the requirements of
subsections (b), (c), and (d) are met with respect to any
service performed by a service provider, then with respect to
such service--
``(1) the service provider shall not be treated as an
employee,
``(2) the service recipient shall not be treated as an
employer,
``(3) any payor shall not be treated as an employer, and
``(4) the compensation paid or received for such service
shall not be treated as paid or received with respect to
employment.
``(b) General Service Provider Requirements.--
``(1) In general.--The requirements of this subsection are
met with respect to any service if the service provider
either--
``(A) meets the requirements of paragraph (2) with respect
to such service, or
``(B) in the case of a service provider engaged in the
trade or business of selling (or soliciting the sale of)
goods or services, meets the requirements of paragraph (3)
with respect to such service.
``(2) General requirements.--
``(A) In general.--The requirements of this paragraph are
met with respect to any
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service if the service provider, in connection with
performing the service--
``(i) incurs expenses--
``(I) which are deductible under section 162, and
``(II) a significant portion of which are not reimbursed,
``(ii) agrees to perform the service for a particular
amount of time, to achieve a specific result, or to complete
a specific task, and
``(iii) satisfies not less than 1 of the factors described
in subparagraph (B).
``(B) Factors.--The factors described in this subparagraph
are the following:
``(i) The service provider has a significant investment in
assets or training which are applicable to the service
performed.
``(ii) The service provider is not required to perform
services exclusively for the service recipient or payor.
``(iii) The service provider has not been treated as an
employee by the service recipient or payor for substantially
the same services during the 1-year period ending with the
date of the commencement of services under the contract
described in subsection (d).
``(iv) The service provider is not compensated on a basis
which is tied primarily to the number of hours actually
worked.
``(3) Alternative requirements with respect to sales
persons.--In the case of a service provider engaged in the
trade or business of selling (or soliciting the sale of)
goods or services, the requirements of this paragraph are met
with respect to any service provided in the ordinary course
of such trade or business if--
``(A) the service provider is compensated primarily on a
commission basis, and
``(B) substantially all the compensation for such service
is directly related to sales of goods or services rather than
to the number of hours worked.
``(c) Place of Business or Own Equipment Requirement.--The
requirement of this subsection is met with respect to any
service if the service provider--
``(1) has a principal place of business,
``(2) does not provide the service primarily in the service
recipient's place of business,
``(3) pays a fair market rent for use of the service
recipient's or payor's place of business, or
``(4) provides the service primarily using equipment
supplied by the service provider.
``(d) Written Contract Requirement.--The requirements of
this subsection are met with respect to any service if such
service is performed pursuant to a written contract between
the service provider and the service recipient or payor,
whichever is applicable, which meets the following
requirements:
``(1) The contract includes each of the following:
``(A) The service provider's name, taxpayer identification
number, and address.
``(B) A statement that the service provider will not be
treated as an employee with respect to the services provided
pursuant to the contract for purposes of this title.
``(C) A statement that the service recipient or payor will
withhold upon and report to the Internal Revenue Service the
compensation payable pursuant to the contract consistent with
the requirements of this title.
``(D) A statement that the service provider is responsible
for payment of Federal, State, and local taxes, including
self-employment taxes, on compensation payable pursuant to
the contract.
``(E) A statement that the contract is intended to be
considered a contract described in this subsection.
The contract shall not fail to meet the requirements of this
paragraph merely because the information described in
subparagraph (A) is collected at the time payment is made for
the services and not in advance, or because the contract
provides that an agent of the service recipient or payor will
fulfill any of the responsibilities of the service recipient
or payor described in the preceding subparagraphs.
``(2) The term of the contract does not exceed 2 years. The
preceding sentence shall not prevent 1 or more subsequent
written renewals of the contract from satisfying the
requirements of this subsection if the term of each such
renewal does not exceed 2 years and if the information
required under paragraph (1)(A) is updated in connection with
each such renewal.
``(3) The contract (or renewal) is signed (which may
include signatures in electronic form) by the service
recipient or payor and the service provider not later than
the date on which the aggregate payments made by the service
recipient or payor to the service provider exceeds $1,000 for
the year covered by the contract (or renewal).
``(e) Reporting Requirements.--
``(1) In general.--For purposes of making any determination
with respect to the liability of a service recipient or payor
for any tax during any taxable year with respect to a service
provider, the application of this section shall be
conditioned on either the service recipient or the payor
satisfying the reporting requirements applicable to such
service recipient or payor under section 6041(a), 6041A(a),
or 6050W with respect to such service provider for such
period.
``(2) Reasonable cause.--For purposes of paragraph (1),
such reporting requirements shall be treated as met if the
failure to satisfy such requirements is due to reasonable
cause and not willful neglect.
``(f) Exception for Services Provided by Owner.--This
section shall not apply with respect to any service provided
by a service provider to a service recipient or payor if the
service provider owns any interest in the service recipient
or the payor with respect to the service provided. The
preceding sentence shall not apply in the case of a service
recipient or payor the stock of which is regularly traded on
an established securities market.
``(g) Limitation on Reclassification by Secretary.--For
purposes of this title--
``(1) Effect of reclassification on service recipients and
payors.--A determination by the Secretary that a service
recipient or a payor should have treated a service provider
as an employee shall be effective with respect to the service
recipient or payor no earlier than the notice date if--
``(A) the service recipient or the payor entered into a
written contract with the service provider which meets the
requirements of subsection (d),
``(B) the service recipient or the payor satisfied the
applicable reporting requirements of section 6041(a),
6041A(a), or 6050W for all relevant taxable years with
respect to the service provider,
``(C) the service recipient or the payor collected and paid
over all applicable taxes imposed under subtitle C for all
relevant taxable years with respect to the service provider,
and
``(D) the service recipient or the payor demonstrates a
reasonable basis for having determined that the service
provider should not be treated as an employee under this
section and that such determination was made in good faith.
``(2) Effect of reclassification on service providers.--A
determination by the Secretary that a service provider should
have been treated as an employee shall be effective with
respect to the service provider no earlier than the notice
date if--
``(A) the service provider entered into a written contract
with the service recipient or the payor which meets the
requirements of subsection (d),
``(B) the service provider satisfied the applicable
reporting requirements of sections 6012(a) and 6017 for all
relevant taxable years with respect to the service recipient
or the payor, and
``(C) the service provider demonstrates a reasonable basis
for determining that the service provider is not an employee
under this section and that such determination was made in
good faith.
``(3) Notice date.--For purposes of this subsection, the
term `notice date' means the 30thday after the earliest of--
``(A) the date on which the first letter of proposed
deficiency which allows the service provider, the service
recipient, or the payor an opportunity for administrative
review in the Internal Revenue Service Office of Appeals is
sent,
``(B) the date on which a deficiency notice under section
6212 is sent, or
``(C) the date on which a notice of determination under
section 7436(b)(2) is sent.
``(4) Reasonable cause exception.--The requirements of
paragraphs (1)(B), (1)(C), and (2)(B) shall be treated as met
if the failure to satisfy such requirements is due to
reasonable cause and not willful neglect.
``(5) No restriction on administrative or judicial
review.--Nothing in this subsection shall be construed as
limiting any provision of law which provides an opportunity
for administrative or judicial review of a determination by
the Secretary.
``(h) Rule of Construction.--Nothing in this section shall
be construed as--
``(1) limiting the ability or right of a service provider,
service recipient, or payor to apply any other provision of
this title, section 530 of the Revenue Act of 1978, or any
common law rules for determining whether an individual is an
employee, or
``(2) establishing a prerequisite for the application of
any provision of law described in paragraph (1).
``(i) Definitions.--For purposes of this section--
``(1) Service provider.--
``(A) In general.--The term `service provider' means any
qualified person who performs service for another person.
``(B) Qualified person.--The term `qualified person'
means--
``(i) any natural person, or
``(ii) any entity if any of the services referred to in
subparagraph (A) are performed by 1 or more natural persons
who directly own interests in such entity.
``(2) Service recipient.--The term `service recipient'
means the person for whom the service provider performs such
service.
``(3) Payor.--The term `payor' means--
``(A) any person, including the service recipient, who pays
the service provider for performing such service, or
``(B) any marketplace platform, as defined in section
6050W(d)(3)(C).
``(j) Regulations.--Notwithstanding section 530(d) of the
Revenue Act of 1978, the Secretary shall issue such
regulations as the Secretary determines are necessary to
carry out the purposes of this section.''.
(b) Voluntary Withholding Agreements and Worker
Classification.--Section 3402(p) is amended by adding at the
end the following new paragraph:
``(4) Worker classification.--Agreements under paragraph
(3) shall not be taken into account in determining whether
any party to such agreement is an employee or an employer for
purposes of this title.''.
(c) Withholding by Payor in Case of Certain Persons
Classified as Not Employees.--Section 3402, as amended by
section 13603(b)(2) of this Act, is amended by redesignating
subsection (t) as subsection (u) and
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inserting after subsection (s) the following new subsection:
``(t) Extension of Withholding to Payments to Certain
Persons Classified as Not Employees.--
``(1) In general.--For purposes of this chapter and so much
of subtitle F as relates to this chapter, compensation paid
pursuant to a contract described in section 7706(d) shall be
treated as if it were a payment of wages by an employer to an
employee.
``(2) Amount withheld.--Except as otherwise provided under
subsection (i), the amount to be deducted and withheld
pursuant to paragraph (1) with respect to compensation paid
pursuant to any such contract during any calendar year shall
be an amount equal to 5 percent of so much of the amount of
such compensation as does not exceed $20,000.''.
(d) Direct Sellers of Promotional Products.--Subsection (b)
of section 3508 is amended--
(1) in paragraph (2)(A)--
(A) in clause (ii), by striking ``or'' at the end,
(B) in clause (iii), by adding ``or'' at the end, and
(C) by inserting after clause (iii) the following new
clause:
``(iv) is engaged in the trade or business of selling, or
soliciting the sale of, promotional products from other than
a permanent retail establishment,'',
(2) by redesignating paragraph (3) as paragraph (4), and
(3) by inserting after paragraph (2) the following new
paragraph:
``(3) Promotional product.--For purposes of paragraph
(2)(A)(iv), the term `promotional product' means a tangible
item with permanently marked promotional words, symbols, or
art of the purchaser.''.
(e) Reporting.--
(1) Information at source.--Section 6041 is amended--
(A) in subsection (a)--
(i) in the heading, by striking ``$600'' and inserting
``$1,000'', and
(ii) by striking ``$600 or more in any taxable year'' and
inserting ``$1,000 or more in any taxable year'', and
(B) by adding at the end the following new subsection:
``(h) Special Rules for Certain Persons Classified as Not
Employees.--
``(1) In general.--In the case of any service recipient or
payor required to make a return under subsection (a) with
respect to compensation to which section 7706(a) applies--
``(A) such return shall include--
``(i) the aggregate amount of such compensation paid to
each person whose name is required to be included on such
return,
``(ii) the aggregate amount deducted and withheld under
section 3402(t) with respect to such compensation, and
``(iii) an indication of whether a copy of the contract
described in section 7706(d) is on file with the service
recipient or payor, and
``(B) the statement required to be furnished under
subsection (d) shall include the information described in
subparagraph (A) with respect to the service provider to whom
such statement is furnished.
``(2) Definitions.--Terms used in this subsection which are
also used in section 7706 shall have the same meaning as when
used in such section.''.
(2) Returns regarding payments of remuneration for services
and direct sales.--Section 6041A is amended--
(A) in paragraph (2) of subsection (a), by striking
``$600'' and inserting ``$1,000'', and
(B) by adding at the end the following new subsection:
``(g) Special Rules for Certain Persons Classified as Not
Employees.--Rules similar to the rules of subsection (h) of
section 6041 shall apply for purposes of this section.''.
(3) Returns relating to payments made in settlement of
payment card and third party network transactions.--Section
6050W is amended--
(A) in subsection (d), by amending paragraph (3) to read as
follows:
``(3) Third party payment network.--
``(A) In general.--The term `third party payment network'
means any agreement or arrangement--
``(i) which involves the establishment of accounts with a
central organization or marketplace platform by a substantial
number of persons who--
``(I) are unrelated to such organization or platform,
``(II) provide goods or services, and
``(III) have agreed to settle transactions for the
provision of such goods or services pursuant to such
agreement or arrangement,
``(ii) which provides for standards and mechanisms for
settling such transactions, and
``(iii) which guarantees persons providing goods or
services pursuant to such agreement or arrangement that such
persons will be paid for providing such goods or services.
``(B) Exception.--The term `third party payment network'
shall not include any agreement or arrangement which provides
for the issuance of payment cards.
``(C) Marketplace platform.--For purposes of subparagraph
(A), the term `marketplace platform' means any person who--
``(i) operates a digital website, mobile application, or
similar system that facilitates the provision of goods or
services by providers to recipients,
``(ii) enters into an agreement with each provider stating
that such provider will not be treated as an employee with
respect to such goods or services,
``(iii) provides standards and mechanisms for settling such
facilitated transactions, and
``(iv) guarantees each provider of goods or services
pursuant to such agreement that the provider will be paid for
such facilitated transaction.'',
(B) by amending subsection (e) to read as follows:
``(e) Exception for De Minimis Payments by Third Party
Settlement Organizations.--
``(1) In general.--A third party settlement organization
shall be required to report any information under subsection
(a) with respect to third party network transactions of any
participating payee only if the amount which would otherwise
be reported under subsection (a)(2) with respect to such
transactions exceeds $1,000.
``(2) Exception.--
``(A) Marketplace platforms.--In the case of a third party
settlement organization which is a marketplace platform (as
defined in subsection (d)(3)(C)) through which substantially
all the participating payees are primarily engaged in the
sale of goods, such marketplace platform shall be required to
report any information under subsection (a) with respect to
third party network transactions of such payee only if--
``(i) the amount which would otherwise be reported under
subsection (a)(2) with respect to such transaction exceeds
$5,000, or
``(ii) the aggregate number of transactions exceeds 50.
``(B) Other third party settlement organizations.--In the
case of a third party settlement organization other than a
marketplace platform--
``(i) the rules of subparagraph (A) shall apply in the case
of information required to be reported, or which would
otherwise be reported, under subsection (a) to any
participating payee who is primarily engaged in the sale of
goods, and
``(ii) the determination of whether a participating payee
is primarily engaged in the sale of goods may be made
separately for each participating payee.
``(3) Election to report.--Notwithstanding paragraphs (1)
and (2), a third party settlement organization may elect to
report any information under subsection (a) with respect to
third party network transactions of any participating payee
without regard to the amount reported under subsection (a)(2)
with respect to such transactions or the aggregate number of
such transactions.'', and
(C) in subsection (f)--
(i) in paragraph (1), by striking ``and'' at the end,
(ii) in paragraph (2), by striking the period at the end
and inserting ``, and'', and
(iii) by inserting after paragraph (2) the following new
paragraph:
``(3) the amount, if any, withheld pursuant to section
3402(t).''.
(f) Proceedings for Determination of Employment Status.--
Paragraph (1) of section 7436(b) is amended to read as
follows:
``(1) Petitioner.--A pleading may be filed under this
section only by--
``(A) the person for whom the services are performed,
including the service recipient or the payor, or
``(B) any service provider which the Secretary has
determined should have been treated as an employee.
All terms used in this paragraph which are also used in
section 7706 have the meanings given such terms in section
7706(i).''.
(g) Clerical Amendment.--The table of sections for chapter
79 is amended by adding at the end the following new item:
``Sec. 7706. Determination of worker classification.''.
(h) Effective Date.--
(1) In general.--Except as provided in paragraphs (2) and
(3), the amendments made by this section shall apply to
services performed after December 31, 2017 (and to payments
made for such services after such date).
(2) Grace period to begin withholding.--A contract shall
not be treated as failing to meet the requirements of section
7706(d)(1)(C) of the Internal Revenue Code of 1986 (as added
by this section), and a service recipient or payor shall not
be treated as failing to meet any such requirement, with
respect to compensation paid to a service provider before the
date that is 180 days after the date of the enactment of this
Act.
(3) Exception for de minimis payments by third party
settlement organizations.--The amendments made by subsection
(e) shall apply to payments made after December 31, 2018.
______