[Congressional Record Volume 165, Number 41 (Thursday, March 7, 2019)]
[Senate]
[Pages S1735-S1738]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. THUNE:
  S. 700. A bill to amend the Internal Revenue Code of 1986 to provide 
a safe harbor for determinations of worker classification, to require 
increased reporting, and for other purposes; to the Committee on 
Finance.
  Mr. THUNE. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

[[Page S1736]]

  


                                 S. 700

       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 ``New Economy Works to 
     Guarantee Independence and Growth Act of 2019'' or the ``NEW 
     GIG Act of 2019''.

     SEC. 2. DETERMINATION OF WORKER CLASSIFICATION.

       (a) In General.--Chapter 79 of the Internal Revenue Code of 
     1986 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 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 30th day 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

[[Page S1737]]

     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) of the Internal Revenue Code 
     of 1986 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 of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new subsection:
       ``(u) 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 of the Internal Revenue Code of 1986 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 of the Internal 
     Revenue Code of 1986 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(s) 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 of such Code 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 of such Code 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(s).''.
       (f) Proceedings for Determination of Employment Status.--
     Paragraph (1) of section 7436(b) of the Internal Revenue Code 
     of 1986 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.


[[Page S1738]]


     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 of the Internal Revenue Code of 1986 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), (3), 
     and (4), the amendments made by this section shall apply to 
     services performed after December 31, 2019 (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) Reporting.--Except as provided in paragraph (4), the 
     amendments made by subsection (e) shall apply to returns the 
     due date for which is after the date which is 2 years after 
     the date of the enactment of this Act.
       (4) Exception for de minimis payments by third party 
     settlement organizations.--The amendment made by subsection 
     (e)(3)(B) shall apply to payments made after December 31, 
     2019.
                                 ______