[Congressional Record (Bound Edition), Volume 147 (2001), Part 6]
[Extensions of Remarks]
[Page 7915]
[From the U.S. Government Publishing Office, www.gpo.gov]



  INTRODUCTION OF THE INDEPENDENT CONTRACTOR DETERMINATION ACT OF 2001

                                 ______
                                 

                        HON. DONALD A. MANZULLO

                              of illinois

                    in the house of representatives

                         Wednesday, May 9, 2001

  Mr. MANZULLO. Mr. Speaker, as Chairman of the Small Business 
Committee, I rise today to introduce a bill, the Independent Contractor 
Determination Act of 2001, to clarify and simplify the determination of 
whether an individual worker is an employee or an independent 
contractor. The current definition of independent contractors is so 
complex that many small businesses face inconsistent Internal Revenue 
Service (IRS) worker reclassifications and potentially crippling back 
taxes, penalties and fines. Today's tax law hinders our dynamic 
economy, which includes millions of independent contractors now used by 
roughly 60 percent of all businesses and many diverse industries.
  The Independent Contractor Determination Act of 2001 would provide a 
new safe harbor to help small business owners use independent 
contractors with more confidence, and to minimize IRS reclassifications 
of their legitimate business relationships. New objective criteria 
would protect both employees and independent contractors. These 
criteria include economic and workplace independence, a written 
contract, and the ability to realize a profit or loss. In addition, to 
protect employees further, the bill includes an effective anti-abuse 
provision that would limit the ability of corporations to treat former 
employees as independent contractors.
  As important as this bill is to protecting all workers by providing 
an objective test for the determination of worker classification, the 
bill also limits the ability of the IRS to reclassify workers 
retroactively. Most small businesses operating as or hiring independent 
contractors do so in good faith and, therefore, face unfairly imposed 
back taxes, penalties and fines. Consequently, the bill allows only 
prospective IRS reclassifications of good faith independent contractor 
determinations, and shifts the burden of proof to the IRS.
  Mr. Speaker, I am pleased to offer this bill as an identical, 
companion bill to one introduced earlier this week by Senator Kit Bond, 
Chairman of the Senate Committee on Small Business, and recommend its 
passage in this Congress.

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