[House Report 118-857]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 118-857
======================================================================
SAVING GIG ECONOMY TAXPAYERS ACT
_______
December 10, 2024.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Smith of Missouri, from the Committee on Ways and Means, submitted
the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 190]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 190) to amend the Internal Revenue Code of 1986 to
reinstate the exception for de minimis payments by third party
settlement organizations with respect to returns relating to
payments made in settlement of payment card and third party
network transactions, as in effect prior to the enactment of
the American Rescue Plan Act, having considered the same,
reports favorably thereon with an amendment and recommends that
the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND........................................... 2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 2
C. Legislative History................................. 3
D. Designated Hearing.................................. 4
II. EXPLANATION OF THE BILL.......................................... 4
A. Reinstatement of Exception for De Minimis Payments
as in Effect Prior to Enactment of American Rescue
Plan Act (sec. 2 of the bill and sec. 6050W(e) of
the Code).......................................... 4
III. VOTE OF THE COMMITTEE............................................ 9
IV. BUDGET EFFECTS OF THE BILL....................................... 9
A. Committee Estimate of Budgetary Effects............. 9
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 10
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 10
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE...... 13
A. Committee Oversight Findings and Recommendations.... 13
B. Statement of General Performance Goals and
Objectives......................................... 13
C. Applicability of House Rule XXI, Clause 5(b)........ 13
D. Information Relating to Unfunded Mandates........... 13
E. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 13
F. Duplication of Federal Programs..................... 14
G. Tax Complexity Analysis............................. 14
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED........... 16
A. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 16
VII. DISSENTING VIEWS................................................ 21
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Saving Gig Economy Taxpayers Act''.
SEC. 2. REINSTATEMENT OF EXCEPTION FOR DE MINIMIS PAYMENTS AS IN EFFECT
PRIOR TO ENACTMENT OF AMERICAN RESCUE PLAN ACT.
(a) In General.--Section 6050W(e) of the Internal Revenue Code of
1986 is amended to read as follows:
``(e) Exception for De Minimis Payments by Third Party Settlement
Organizations.--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--
``(1) the amount which would otherwise be reported under
subsection (a)(2) with respect to such transactions exceeds
$20,000, and
``(2) the aggregate number of such transactions exceeds
200.''.
(b) Effective Date.--The amendment made by this section shall apply
to returns for calendar years beginning after December 31, 2021.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 190, the ``Saving Gig Economy Taxpayer
Act,'' as ordered reported by the Committee on Ways and Means
on September 11, 2024.
The bill reverts to the previous de minimis reporting
exception for third party settlement organizations. A third
party settlement organization is not required to report unless
the aggregate value of third party network transactions with
respect to a participating payee for the year exceeds $20,000
and the aggregate number of such transactions with respect to a
participating payee exceeds 200.
B. Background and Need for Legislation
The American Rescue Plan Act (ARPA) of 2021 targeted
hardworking Americans by reducing the 1099-K reporting
thresholds from $20,000 in earnings and 200 individual
transactions to only $600, increasing taxes and paperwork
burdens on workers, especially those in the gig economy,
already trying to make ends meet in the Biden-Harris cost of
living crisis. In December 2022, the Biden-Harris
Administration's IRS unilaterally delayed implementation of
this provision for tax year 2022; it did so again in November
2023 for tax year 2023. In December 2023, Ways and Means
Republicans sent a letter to IRS Commissioner Daniel Werfel
calling on him to testify before the Committee regarding the
Biden-Harris Administration's refusal to implement their own
policy which they forced into law without bipartisan support.
In February 2024, Commissioner Werfel testified in front of the
Ways and Means Committee and evaded questions regarding the
IRS's authority to change the Form 1099-K threshold without
Congressional authorization. The IRS said it plans to increase
the threshold from $600 to $5,000 for tax year 2024. Then, two
days before Thanksgiving 2024, the IRS announced it would again
delay implementation of the law. It also confirmed it would
implement a $5,000 threshold for one year, $2,500 for the next
year, and then finally implement the threshold in the law of
$600.
ARPA clearly created a $600 threshold level. The IRS has
not implemented the law for three straight years and now says
it will not do so until five years after the effective date in
ARPA. Creating its own threshold, which Congress has not
authorized, is an affront to Congress's authority. The IRS does
not have the legal authority to create tax policy out of thin
air. The repeated delay of implementation has allowed Democrats
in Congress to avoid facing accountability for the consequences
of their own policy choices. The repeated delays also
demonstrate that the ARPA policy is not workable and should be
reversed.
The Biden-Harris Administration knew this rule would hit
low- and middle-income Americans violating their pledge to not
raise taxes on those making less than $400,000, which is why
they have delayed its implementation each year since ARPA was
enacted. According to the Joint Committee on Taxation (JCT), 90
percent of the tax burden would fall on filers that make less
than $200,000. These unilateral decisions circumvented the law
and allowed the Biden Administration to avoid sending over 44
million tax forms in an election year. The Saving Gig Economy
Taxpayers Act stops the attack on the gig economy and American
workers Reverts thresholds for third-party settlement
organizations back to pre-ARPA reporting requirements.
C. Legislative History
Background
H.R. 190 was introduced on January 9, 2023, and was
referred to the Committee on Ways and Means.
Committee Hearings
On March 10, 2023, the Committee held a hearing entitled
``President Biden's Fiscal Year 2024 Budget Request with
Treasury Secretary Yellen.''
On April 21, 2023, the Committee held a field hearing
entitled ``The State of the American Economy: The South.''
On April 27, 2023, the Committee held a hearing entitled
``Accountability and Transparency at the Internal Revenue
Service with IRS Commissioner Werfel.''
On February 15, 2024, the Committee held a hearing entitled
``Hearing with Commissioner of the Internal Revenue Service,
Daniel Werfel.''
On April 30, 2024, the Committee received testimony from
Janet L. Yellen, United States Secretary of the Treasury.
Committee Action
The Committee on Ways and Means marked up H.R. 190, the
``Saving Gig Economy Taxpayers Act'' on September 11, 2024, and
ordered the bill, as amended, favorably reported (with a quorum
being present).
D. Designated Hearing
Pursuant to clause 3(c)(6) of rule XIII, the following
hearings were used to develop and consider H.R. 190:
On March 10, 2023, the Committee held a hearing entitled
``President Biden's Fiscal Year 2024 Budget Request with
Treasury Secretary Yellen.''
On April 21, 2023, the Committee held a field hearing
entitled ``The State of the American Economy: The South.''
On April 27, 2023, the Committee held a hearing entitled
``Accountability and Transparency at the Internal Revenue
Service with IRS Commissioner Werfel.''
On February 15, 2024, the Committee held a hearing entitled
``Hearing with Commissioner of the Internal Revenue Service,
Daniel Werfel.''
On April 30, 2024, the Committee received testimony from
Janet L. Yellen, United States Secretary of the Treasury.
II. EXPLANATION OF THE BILL
A. Reinstatement of Exception for De Minimis Payments as in Effect
Prior to Enactment of American Rescue Plan Act (Sec. 2 of the Bill and
Sec. 6050W(e) of the Code)
PRESENT LAW
Present law requires persons to file an information return
concerning certain transactions with other persons.\1\ The
person filing an information return is also required to provide
the person for whom the information return is being filed with
a written statement showing the information that was reported
to the IRS, which generally includes aggregate payments made,
and the contact information for the payor.\2\ These returns are
intended to assist taxpayers in preparing their income tax
returns and to help the IRS determine whether such income tax
returns are correct and complete.
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\1\Secs. 6041 through 6050Y.
\2\See, e.g., sec. 6041(d).
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Returns relating to payments made in settlement of payment card and
third party network transactions
Since 2012 (for payments received in 2011), payment
settlement entities are required to report to the IRS and to
businesses that receive these payments the gross amount of
payments made in settlement of payment card transactions and
third party network transactions.\3\
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\3\Sec. 6050W; Pub. L. No. 110-289 (2008), sec. 3091(a) enacted
sec. 6050W, effective generally for returns for calendar years
beginning after December 31, 2010.
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Specifically, any payment settlement entity making a
payment to a participating payee in settlement of reportable
payment transactions must report annually to the IRS and to the
participating payee the gross amount of such reportable payment
transactions, as well as the name, address, and TIN of the
participating payee.\4\ A ``reportable payment transaction''
means any payment card transaction and any third party network
transaction.\5\
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\4\Sec. 6050W(a).
\5\Sec. 6050W(c)(1).
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A ``payment settlement entity'' means, in the case of a
payment card transaction, a merchant acquiring entity (defined
below) and, in the case of a third party network transaction,
the third party settlement organization.\6\ A ``participating
payee'' means, in the case of a payment card transaction, any
person who accepts a payment card as payment and, in the case
of a third party network transaction, any person who accepts
payment from a third party settlement organization in
settlement of such transaction.\7\ A ``person'' includes a
governmental unit. A ``person'' generally does not include
someone with a foreign address.\8\
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\6\Sec. 6050W(b).
\7\Sec. 6050W(d)(1).
\8\Sec. 6050W(d)(1)(B) and (C).
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Returns relating to payments made in settlement of payment
card transactions
For purposes of the reporting requirement, the term
``merchant acquiring entity'' means a bank or other
organization with the contractual obligation to make payments
to participating payees in settlement of payment card
transactions.\9\ A ``payment card transaction'' means any
transaction in which a payment card is accepted as payment.\10\
A ``payment card'' is defined as any card (e.g., a credit card
or debit card) which is issued pursuant to an agreement or
arrangement which provides for: (1) one or more issuers of such
cards; (2) a network of persons unrelated to each other, and to
the issuer, who agree to accept such cards as payment; and (3)
standards and mechanisms for settling the transactions between
the merchant acquiring entities and the persons who agree to
accept such cards as payment.\11\ Thus, a bank that enrolls a
business to accept credit cards and contracts with the business
to make payment on credit card transactions must report to the
IRS the business's gross credit card transactions for each
calendar year on a Form 1099-K, Payment Card and Third Party
Network Transactions. The bank also must provide a copy of the
information return to the business.
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\9\Sec. 6050W(b)(2).
\10\For this purpose, the acceptance as payment of any account
number or other indicia associated with a payment card also qualifies
as a payment card transaction.
\11\Sec. 6050W(d)(2).
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Returns relating to payments made in settlement of third
party network transactions
The statute also requires reporting on a third party
network transaction. The term ``third party network
transaction'' means any transaction which is settled through a
third party payment network.\12\ A ``third party payment
network'' is defined as any agreement or arrangement: (1) that
involves the establishment of accounts with a central
organization by a substantial number of persons (generally
considered to be more than 50) who are unrelated to such
organization, provide goods or services, and agree to settle
transactions for the provision of such goods or services
pursuant to such agreement or arrangement; (2) that provides
for standards and mechanisms for settling such transactions;
and (3) that guarantees persons providing goods or services
pursuant to such agreement or arrangement will be paid for
providing such goods or services.\13\
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\12\Sec. 6050W(c)(3).
\13\Sec. 6050W(d)(3).
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In the case of a third party network transaction, the
payment settlement entity is the third party settlement
organization, which is defined as the central organization
which has the contractual obligation to make payment to
participating payees of third party network transactions.\14\
Thus, an organization generally is required to report if it
provides a network enabling buyers to transfer funds to sellers
who have established accounts with the organization and have a
contractual obligation to accept payment through the network.
However, an organization operating a network which merely
processes electronic payments (such as wire transfers,
electronic checks, and direct deposit payments) between buyers
and sellers, but does not have contractual agreements with
sellers to use such network, is not required to report.
Similarly, an agreement to transfer funds between two demand
deposit accounts will not, by itself, constitute a third party
network transaction.
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\14\Sec. 6050W(b)(3).
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De minimis payment exception
A third party payment network does not include any
agreement or arrangement that provides for the issuance of
payment cards as defined by the provision.\15\ In addition,
there is an exception for de minimis payments that applies to
payments made by third party settlement organizations but not
to payments made by merchant acquiring entities. For calendar
years beginning after December 31, 2021, a third party
settlement organization is required to report third party
network transactions with any participating payee that exceed a
minimum threshold of $600 in aggregate payments, regardless of
the aggregate number of such transactions.\16\ In other words,
there is not a threshold requirement for the number of
transactions. In addition, third party network transactions
only include transactions for the provision of goods or
services. Reporting is not required for other transactions,
including personal gifts, charitable contributions, and
reimbursements.
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\15\Sec. 6050W(d)(3).
\16\Sec. 6050W(e); American Rescue Plan Act, Pub. L. No. 117-2,
Title IX, sec. 9674, March 11, 2021, amending sec. 6050W(e), effective
generally for returns for calendar years beginning after December 31,
2021.
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The previous exception for de minimis payments for calendar
years beginning prior to January 1, 2022, provided that a third
party settlement organization was not required to report unless
the aggregate value of third party network transactions with
respect to a participating payee for the year exceeds $20,000
and the aggregate number of such transactions with respect to a
participating payee exceeds 200.
Notwithstanding the revisions to the de minimis payment
exception, the IRS allowed third party settlement organizations
to delay implementation of the $600 aggregate payment threshold
for calendar years 2022 and 2023.\17\ As a result, for these
years, reporting was not required unless the third party
settlement organization's receipts were over the prior
threshold--$20,000 and more than 200 transactions. The IRS
stated that the reason for this delay was the complexity of the
threshold change enacted under the American Rescue Plan
Act.\18\ In addition, the IRS has said that due to the large
number of individual taxpayers affected by the new law, the IRS
is planning for a threshold of $5,000 for calendar year 2024 as
part of a phase-in to implement the $600 reporting
threshold.\19\
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\17\Notice 2023-10, 2023-3 I.R.B. 403, January 17, 2023, and Notice
2023-74, 2023-51 I.R.B. 1484, December 18, 2023.
\18\IR-2023-221, Nov. 21, 2023, available at https://www.irs.gov/
newsroom/irs-announces-delay-in-form-1099-k-reporting-threshold-for-
third-party-platform-payments-in-2023-plans-for-a-thresh
old-of-5000-for-2024-to-phase-in-implementation.
\19\Ibid.
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Rules regarding reporting requirements
There are also reporting requirements on intermediaries who
receive payments from a payment settlement entity and
distribute such payments to one or more participating
payees.\20\ Such intermediaries are treated as participating
payees with respect to the payment settlement entity and as
payment settlement entities with respect to the participating
payees to whom the intermediary distributes payments. Thus, for
example, in the case of a corporation that receives payment
from a bank for credit card sales conducted at the
corporation's independently-owned franchise stores, the bank is
required to report to the corporation and to the IRS the gross
amount of reportable payment transactions settled with respect
to the corporation (notwithstanding the fact that the
corporation does not accept payment cards and would not
otherwise be treated as a participating payee). In turn, the
corporation, as an intermediary, is required to report the
gross amount of reportable payment transactions allocable to
each franchise store. The bank has no reporting obligation with
respect to payments made by the corporation to its franchise
stores.
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\20\Sec. 6050W(b)(4).
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In addition, if a payment settlement entity contracts with
a third party facilitator to settle reportable payment
transactions on behalf of the payment settlement entity, the
third party facilitator is required to file the annual
information return in lieu of the payment settlement
entity.\21\
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\21\Sec. 6050W(b)(4)(B); Treas. Reg. sec. 1.6050W-1(d)(2).
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The payment settlement entity is required to file
information returns to the IRS on or before February 28 (March
31 if filing electronically) of the year following the calendar
year for which the returns must be filed.\22\ Statements are
required to be furnished to the participating payees on or
before January 31 of the year following the calendar year for
which the return was required to be made.\23\
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\22\Treas. Reg. sec. 1.6050W-1(g). Taxpayers that file these
information returns that report reportable payment transactions are
entitled to a 30-day automatic extension of time to file. Treas. Reg.
sec. 1.6081-8(a) (effective for requests for extension of time to file
certain information returns due after December 31, 2016).
\23\Sec. 6050W(f); Treas. Reg. sec. 1.6050W-1(h).
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The Secretary has exercised authority under these rules to
issue guidance to implement the reporting requirement,
including rules to prevent the reporting of the same
transaction more than once.\24\
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\24\Treas. Reg. sec. 1.6050W-1(a)(4)(ii).
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The reportable payment transactions subject to information
reporting generally are subject to backup withholding
requirements. In addition, the information reporting penalties
apply for any failure to file a correct information return or
furnish a correct payee statement with respect to the
reportable payment transactions. Any person who is required to
file an information return or furnish a payee statement but who
fails to do so on or before the prescribed due date is subject
to a penalty that varies based on when, if at all, the correct
information return is filed or furnished. Penalties are imposed
for failure to file the information return\25\ or furnish payee
statements.\26\ No penalty is imposed if the failure is due to
reasonable cause.\27\ Both the failure to file and failure to
furnish penalties are adjusted annually to account for
inflation.
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\25\Sec. 6721.
\26\Sec. 6722. Section 6723 also imposes a penalty for failure to
comply timely with a specified information reporting requirement.
However, this penalty applies in narrow circumstances and is unlikely
to apply to payment settlement entities under section 6050W. See Treas.
Reg. sec. 301.6723-1(a)(4).
\27\Sec. 6724(a).
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REASONS FOR CHANGE
The Committee believes that the previous de minimis
reporting threshold should be reinstated because the lower
threshold means that millions of individuals will receive Form
1099-Ks for the first time next year--often in instances where
there is no tax liability, creating significant confusion and
administrative challenges. For example, selling a used piece of
furniture for less than the original purchase price will not
create any taxable income. However, the Committee notes that
these transactions may trigger reporting requirements if the
previous threshold is not reinstated, yielding confusion for
online platforms and taxpayers, which could result in
overreporting of income and therefore overpayment of taxes as
well as ineligibility for certain tax benefits. The Committee
believes reverting back to the previous reporting threshold is
necessary to prevent numerous individuals from having to hire
tax professionals and keep onerous records and receipts or from
being misled into thinking the arrival of a Form 1099-K
represents taxable income they must report.
EXPLANATION OF PROVISION
The provision reverts to the previous de minimis reporting
exception for third party settlement organizations, and the
same threshold the IRS has followed for calendar years 2022 and
2023. A third party settlement organization is not required to
report unless the aggregate value of third party network
transactions with respect to a participating payee for the year
exceeds $20,000 and the aggregate number of such transactions
with respect to a participating payee exceeds 200.
The provision does not change the clarification that
reporting is not required on transactions which are not for
goods or services.
The obligations of a merchant acquiring entity are
unchanged. For example, if a company is considered a merchant
acquiring entity, it must issue a Form 1099-K to all
participating payees who have received payments of any amount
starting with the first dollar. On the other hand, if a
business that provides an online marketplace for sales of goods
such as clothing, cars, furniture, etc. is considered a third
party settlement organization, under this provision, it does
not have to provide a Form 1099-K to sellers participating on
its web-based platform who have received payments of $20,000 or
less or to sellers who have engaged in 200 or fewer
transactions.
EFFECTIVE DATE
The provision applies as if included in section 9674 of
Public Law No. 117-2, the American Rescue Plan Act (enacted on
March 11, 2021). Thus, the provision applies to returns for
calendar years beginning after December 31, 2021.
III. VOTE OF THE COMMITTEE
Pursuant to clause 3(b) of rule XIII of the Rules of the
House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 190, the ``Saving Gig Economy Taxpayers
Act,'' on September 11, 2024.
H.R. 190 was ordered favorably reported to the House of
Representatives as amended by a roll call vote of 22 yeas to 16
nays (with a quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... X ...... ......... Mr. Neal............. ...... X .........
Mr. Buchanan....................... X ...... ......... Mr. Doggett.......... ...... X .........
Mr. Smith (NE)..................... X ...... ......... Mr. Thompson......... ...... X .........
Mr. Kelly.......................... X ...... ......... Mr. Larson........... ...... X .........
Mr. Schweikert..................... X ...... ......... Mr. Blumenauer....... ...... X .........
Mr. LaHood......................... X ...... ......... Mr. Davis............ ...... X .........
Dr. Wenstrup....................... X ...... ......... Ms. Sanchez.......... ...... X .........
Mr. Arrington...................... ...... ...... ......... Ms. Sewell........... ...... ...... .........
Dr. Ferguson....................... X ...... ......... Ms. DelBene.......... ...... X .........
Mr. Estes.......................... ...... ...... ......... Ms. Chu.............. ...... X .........
Mr. Smucker........................ X ...... ......... Ms. Moore............ ...... X .........
Mr. Hern........................... X ...... ......... Mr. Kildee........... ...... X .........
Ms. Miller......................... X ...... ......... Mr. Beyer............ ...... X .........
Dr. Murphy......................... ...... ...... ......... Mr. Evans............ ...... ...... .........
Mr. Kustoff........................ X ...... ......... Mr. Schneider........ ...... X .........
Mr. Fitzpatrick.................... X ...... ......... Mr. Panetta.......... ...... X .........
Mr. Steube......................... X ...... ......... Mr. Gomez............ ...... X .........
Ms. Tenney......................... X ...... ......... Mr. Horsford......... ...... X .........
Mrs. Fischbach..................... X ...... .........
Mr. Moore.......................... X ...... .........
Mrs. Steel......................... X ...... .........
Ms. Van Duyne...................... X ...... .........
Mr. Feenstra....................... X ...... .........
Ms. Malliotakis.................... X ...... .........
Mr. Carey.......................... X ...... .........
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IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 190 as
reported. The estimate prepared by the Joint Committee on
Taxation (JCT) is included below.
The bill is estimated to have the following effect on
Federal fiscal year budget receipts for the period 2024 through
2034.:
FISCAL YEARS
[Billions of dollars]
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2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2025-29 2025-34
--------------------------------------------------------------------------------------------------------------------------------------------------------
-1.0 -0.8 -0.9 -0.9 -0.9 -1.0 -1.0 -1.1 -1.2 -1.2 -4.5 -10.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
B. Statement Regarding New Budget Authority and
Tax Expenditures Budget Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority.
C. Cost Estimate Prepared by the Congressional
Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
H.R. 190 would restore the thresholds for third-party
settlement organizations to report certain payments to the
Internal Revenue Service (IRS) to amounts in effect before the
2021 enactment of the American Rescue Plan Act (ARPA). Under
the bill, reporting would be required for payees receiving
$20,000 or more for 200 or more transactions in a year.
Third-party settlement organizations, including payment
applications and online marketplaces, can arrange payments
between buyers and sellers in commercial transactions. Those
organizations report information, including payment totals and
payees' tax identification numbers, to the IRS using Form 1099-
K, ``Payment Card and Third-Party Network Transactions,'' when
payees' total transactions for a year exceed certain
thresholds. From 2012 to 2021, reporting was required for
payees that received more than $20,000 from 200 or more
transactions. In 2021, ARPA reduced the threshold to $600 with
no requirement for the number of transactions. In calendar
years 2022 and 2023, the IRS permitted third- party settlement
organizations to delay implementation of that provision,
keeping the $20,000 and 200-transaction threshold.
The Congressional Budget Act of 1974, as amended,
stipulates that revenue estimates provided by the staff of the
Joint Committee on Taxation (JCT) will be the official
estimates for all tax legislation considered by the Congress.
As such, CBO incorporates those estimates into its cost
estimates of the effects of legislation. The estimates for the
revenue provisions of H.R. 190 were provided by JCT.\1\
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\1\Joint Committee on Taxation, Description of H.R. 190, the
``Saving Gig Economy Taxpayers Act,'' JCX-39-24 (September 9, 2024),
www.jct.gov/publications/2024/jcx-39-24.
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The estimated budgetary effect of H.R. 190 is shown in
Table 1. The costs of the legislation fall within budget
function 800 (general government).
TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 190
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By fiscal year, billions of dollars--
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2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2025-2029 2025-2034
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DECREASES IN REVENUES
Estimated Revenues............................ -1.0 -0.8 -0.9 -0.9 -0.9 -1.0 -1.0 -1.1 -1.2 -1.2 -4.5 -10.0
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Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
CBO estimates that implementing H.R. 190 would increase costs for the Department of the Treasury by less than $500,000 over the 2025-2029 period.
For this estimate, CBO and JCT assume that the bill will be
treated as if its provisions were included in ARPA. H.R. 190
would apply to tax returns for calendar years beginning after
December 31, 2021. JCT estimates that enacting the bill would
reduce revenues by $10 billion over the 2025-2034 period
because taxpayers would report less taxable income to the IRS.
CBO estimates that implementing the bill would increase
costs for the Department of the Treasury by less than $500,000
over the 2025-2029 period. Any related spending would be
subject to the availability of appropriated funds.
The CBO staff contact for this estimate is Ellen Steele.
The estimate was reviewed by John McClelland, Director of Tax
Analysis.
Phillip L. Swagel,
Director, Congressional Budget Office.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.
C. Applicability of House Rule XXI, Clause 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
provide such a Federal income tax rate increase.
D. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
E. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
F. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
G. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, a summary description of the bill is
provided below along with an estimate of the number and type of
affected taxpayers, and a discussion regarding the relevant
complexity and administrative issues.
Following the analysis of the staff of the Joint Committee
on Taxation are the comments of the IRS and Treasury regarding
the complexity analysis for the bill.
REINSTATEMENT OF EXCEPTION FOR DE MINIMIS PAYMENTS AS IN EFFECT PRIOR
TO ENACTMENT OF AMERICAN RESCUE PLAN ACT
Summary description of provision
The provision reverts to the previous de minimis reporting
exception for third party settlement organizations. A third
party settlement organization is not required to report unless
the aggregate value of third party network transactions with
respect to a participating payee for the year exceeds $20,000
and the aggregate number of such transactions with respect to a
participating payee exceeds 200.
Number of affected taxpayers
It is estimated that the provision will affect more than 10
percent of individual or small business tax returns.
Discussion
If greater reporting from unrelated third parties were
available, it is possible that the IRS could more readily
identify areas of underreported income of the payees. In
general, the more payments to which information reporting and/
or withholding applies, the greater the improvement in
compliance. However, proponents of the provision have noted
that if the previous threshold is not reinstated, it could
yield to confusion for online platforms and taxpayers with
casual or low-level on-line activity, which could result in
overreporting of income and therefore overpayment of taxes as
well as ineligibility for certain tax benefits. They contend
that aggregate reporting on a Form 1099-K of gross proceeds
will create confusion for taxpayers who will have to report
each sale or transaction independent of others to correctly
calculate gain or loss. Proponents further content that the
lower threshold may require taxpayers to hire tax professionals
and keep onerous records and receipts or may mislead them into
thinking the existence of a Form 1099-K represents taxable
income they must report.
Department of the Treasury,
Internal Revenue Service,
Washington, DC, September 13, 2024.
Mr. Thomas A. Barthold,
Chief of Staff, Joint Committee on Taxation,
Washington, DC.
Dear Mr. Barthold: I am responding to your letter dated
September 11, 2024, in which you requested a complexity
analysis related to the Committee Report for H.R. 190, ``Saving
Gig Economy Taxpayers Act.''
Enclosed are the combined comments of the Internal Revenue
Service (IRS) and the Department of the Treasury for inclusion
in the complexity analysis in the Committee Report for H.R.
190, ``Saving Gig Economy Taxpayers Act.''
Our analysis covers the provision that you preliminarily
identified in your letter. The provision would reduce payor
filing burden (for some payors, the reduction in burden could
be significant); increase taxpayer record keeping obligations
because the information returns would not cover all
transactions and income; increase confusion for businesses due
to differences between reporting requirements for 1099-K and
1099-NEC; Forms, instructions and publications would need to be
updated; IT programming would need to be reviewed and
potentially updated to reflect the new reporting requirements;
Internal Revenue Manuals and employee training would need to be
updated; Training materials for new employees would need to be
reviewed and potentially updated; and IRS efforts to identify
income underreporting and income tax nonfilers could be
affected, as IRS would receive less payor information reports.
This reduced income visibility to IRS would create an incentive
for taxpayer noncompliance.
Our comments are based on the description of the provision
provided in your letter. This analysis does not include the
administrative cost estimates for the changes that would be
required. Due to the short turnaround time, our comments are
provisional and subject to change upon a more complete and in-
depth analysis of the provisions.
I hope this information is helpful. If you have any
questions, please feel free to contact me, or your staff may
contact Peter Davila, Acting Chief, Legislation and Reports
Branch, Office of Legislative Affairs, at 202-317-4236.
Sincerely,
Daniel I. Werfel,
Commissioner.
Enclosure.
H.R. 190, ``SAVING GIG ECONOMY TAXPAYERS ACT''
Summary description of provision
The proposal reverts to the previous de minimis reporting
exception for third party settlement organizations. A third
party settlement organization is not required to report unless
the aggregate value of third party network transactions with
respect to a participating payee for the year exceeds $20,000
and the aggregate number of such transactions with respect to a
participating payee exceeds 200.
IRS and Treasury Comments
Reduces payor filing burden (for some payors, the
reduction in burden could be significant).
Increases taxpayer record keeping obligations
because the information returns would not cover all
transactions and income.
Increases confusion for businesses due to
differences between reporting requirements for 1099-K and 1099-
NEC.
Forms, instructions and publications would need to
be updated.
IT programming would need to be reviewed and
potentially updated to reflect the new reporting requirements.
Internal Revenue Manuals and employee training
would need to be updated.
Training materials for new employees would need to
be reviewed and potentially updated.
Internal communications would be shared with all
employees.
External communications would be necessary to
communicate changes. Communication also would need to address
inaccurate perceptions that the change to the reporting
requirements changes the tax consequences of any taxable
amounts not reported to IRS.
IRS.gov updates would need to be provided.
IRS efforts to identify income underreporting and
income tax nonfilers could be affected, as IRS would receive
less payor information reports. This reduced income visibility
to IRS creates an incentive for taxpayer noncompliance.
If you have any questions regarding the analysis, please
feel free to call me at 317-4236.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL,
AS REPORTED
A. Changes in Existing Law Proposed by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 61--INFORMATION AND RETURNS
* * * * * * *
Subchapter A--RETURNS AND RECORDS
* * * * * * *
PART III--INFORMATION RETURNS
* * * * * * *
Subpart B--INFORMATION CONCERNING TRANSACTIONS WITH OTHER PERSONS
* * * * * * *
SEC. 6050W. RETURNS RELATING TO PAYMENTS MADE IN SETTLEMENT OF PAYMENT
CARD AND THIRD PARTY NETWORK TRANSACTIONS.
(a) In general.--Each payment settlement entity shall make a
return for each calendar year setting forth--
(1) the name, address, and TIN of each participating
payee to whom one or more payments in settlement of
reportable payment transactions are made, and
(2) the gross amount of the reportable payment
transactions with respect to each such participating
payee.
Such return shall be made at such time and in such form and
manner as the Secretary may require by regulations.
(b) Payment settlement entity.--For purposes of this
section--
(1) In general.--The term ``payment settlement
entity'' means--
(A) in the case of a payment card
transaction, the merchant acquiring entity, and
(B) in the case of a third party network
transaction, the third party settlement
organization.
(2) Merchant acquiring entity.--The term ``merchant
acquiring entity'' means the bank or other organization
which has the contractual obligation to make payment to
participating payees in settlement of payment card
transactions.
(3) Third party settlement organization.--The term
``third party settlement organization'' means the
central organization which has the contractual
obligation to make payment to participating payees of
third party network transactions.
(4) Special rules related to intermediaries.--For
purposes of this section--
(A) Aggregated payees.--In any case where
reportable payment transactions of more than
one participating payee are settled through an
intermediary--
(i) such intermediary shall be
treated as the participating payee for
purposes of determining the reporting
obligations of the payment settlement
entity with respect to such
transactions, and
(ii) such intermediary shall be
treated as the payment settlement
entity with respect to the settlement
of such transactions with the
participating payees.
(B) Electronic payment facilitators.--In any
case where an electronic payment facilitator or
other third party makes payments in settlement
of reportable payment transactions on behalf of
the payment settlement entity, the return under
subsection (a) shall be made by such electronic
payment facilitator or other third party in
lieu of the payment settlement entity.
(c) Reportable payment transaction.--For purposes of this
section--
(1) In general.--The term ``reportable payment
transaction'' means any payment card transaction and
any third party network transaction.
(2) Payment card transaction.--The term ``payment
card transaction'' means any transaction in which a
payment card is accepted as payment.
(3) Third party network transaction.--The term
``third party network transaction'' means any
transaction described in subsection (d)(3)(A)(iii)
which is settled through a third party payment network.
(d) Other definitions.--For purposes of this section--
(1) Participating payee.--
(A) In general.--The term ``participating
payee'' means--
(i) in the case of a payment card
transaction, any person who accepts a
payment card as payment, and
(ii) in the case of a third party
network transaction, any person who
accepts payment from a third party
settlement organization in settlement
of such transaction.
(B) Exclusion of foreign persons.--Except as
provided by the Secretary in regulations or
other guidance, such term shall not include any
person with a foreign address. Notwithstanding
the preceding sentence, a person with only a
foreign address shall not be treated as a
participating payee with respect to any payment
settlement entity solely because such person
receives payments from such payment settlement
entity in dollars.
(C) Inclusion of governmental units.--The
term ``person'' includes any governmental unit
(and any agency or instrumentality thereof).
(2) Payment card.--The term ``payment card'' means
any card which is issued pursuant to an agreement or
arrangement which provides for--
(A) one or more issuers of such cards,
(B) a network of persons unrelated to each
other, and to the issuer, who agree to accept
such cards as payment, and
(C) standards and mechanisms for settling the
transactions between the merchant acquiring
entities and the persons who agree to accept
such cards as payment.
The acceptance as payment of any account number or
other indicia associated with a payment card shall be
treated for purposes of this section in the same manner
as accepting such payment card as payment.
(3) Third party payment network.--The term ``third
party payment network'' means any agreement or
arrangement--
(A) which involves the establishment of
accounts with a central organization by a
substantial number of persons who--
(i) are unrelated to such
organization,
(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,
(B) which provides for standards and
mechanisms for settling such transactions, and
(C) 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.
Such term shall not include any agreement or
arrangement which provides for the issuance of payment
cards.
[(e) De minimis exception for third party settlement
organizations.--A third party settlement organization shall not
be required to report any information under subsection (a) with
respect to third party network transactions of any
participating payee if the amount which would otherwise be
reported under subsection (a)(2) with respect to such
transactions does not exceed $600.]
(e) Exception for De Minimis Payments by Third Party
Settlement Organizations.--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--
(1) the amount which would otherwise be reported
under subsection (a)(2) with respect to such
transactions exceeds $20,000, and
(2) the aggregate number of such transactions exceeds
200.
(f) Statements to be furnished to persons with respect to
whom information is required.--Every person required to make a
return under subsection (a) shall furnish to each person with
respect to whom such a return is required a written statement
showing--
(1) the name, address, and phone number of the
information contact of the person required to make such
return, and
(2) the gross amount of the reportable payment
transactions with respect to the person required to be
shown on the return.
The written statement required under the preceding sentence
shall be furnished to the person on or before January 31 of the
year following the calendar year for which the return under
subsection (a) was required to be made. Such statement may be
furnished electronically, and if so, the email address of the
person required to make such return may be shown in lieu of the
phone number.
(g) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out this section, including rules to
prevent the reporting of the same transaction more than once.
* * * * * * *
VII. DISSENTING VIEWS
Committee Democrats believe that H.R. 190, the ``Saving Gig
Economy Taxpayers Act'', is a backwards step for ensuring
taxpayer compliance with Federal tax laws, and would needlessly
increase the Federal deficit by nearly $10 billion.
The American Rescue Plan lowered the threshold at which
certain online businesses that provide networks for commercial
transactions would need to report amounts paid to service
providers to $600 (to match the threshold to the Form NEC,
prior to the change above), and removed the transactions
threshold. H.R. 190 would revert IRC 6050W to prior law, so
that reporting would be required only if the service provider
received more than $20,000 and had registered 200 or more
transactions.
While we understand the desire to simply ``repeal''
whatever Democrats may have done on a party-line basis, it is
worth noting that Committee Republicans are proposing to revert
the law back to its state in 2006, before virtually any of the
gig economy businesses that are widely subject to this
reporting requirement were even invented. That somehow
Republicans would look at the state of the world in 2024 and
conclude that the ideal law is one that was enacted before much
of our modern economy even existed is baffling to say the
least. While many on both sides of the aisle have signaled a
willingness to raise the $600 threshold,\1\ Republicans'
insistence on retaining the 200-transaction threshold will
eliminate reporting for many taxpayers who earn a lot of money
using third party apps. For instance, an Airbnb that is rented
out weekly would never receive an IRS form under this
provision. If Republicans had any real interest in closing the
tax gap, rather than just using gig economy taxpayers as a
political pawn, they would not include this 200-transaction
threshold in their proposal.
\1\For instance, Reps. Pappas and Kildee have introduced the Cut
Red Tape for Online Sales Act, which would raise the gross payment
threshold to $5,000, but would not re-introduce the transaction
threshold. Additionally, that bill would require the IRS to provide a
plain-language description of the taxability of income reported on Form
1099-K to reduce confusion among online sellers.
---------------------------------------------------------------------------
Richard E. Neal
Over the last four years, Democrats on the Ways and Means
Committee have been focused on creating a tax system that is
simple, fair and supports American working families--not the
wealthiest and biggest corporations.
We have worked to expand the Child Tax Credit, which helped
lower costs for working families with children and nearly cut
child poverty in half. We also expanded the Earned Income Tax
Credit, delivering a tax cut of roughly $1,500 to workers
without children. We have also kept the promise we made to the
American people--if you make under $400,000 a year, you will
not see your taxes go up.
We have also been focused on creating a tax system that
ensures everyone--including the wealthiest individuals--pay
their fair share in taxes. Now, before the American Rescue
Plan, online platforms like eBay, PayPal, and Airbnb--sometimes
called third party settlement organizations--were required to
send a tax reporting form, the form 1099-K, to taxpayers that
received income through these platforms if:
1. A taxpayer received over $20,000 a year and
2. they conducted at least 200 transactions through that
platform.
Unfortunately, this was a loophole in our tax laws.
This old system would allow, for instance, a wealthy
individual with a mountain vacation home in Vail to rent out
their home for $1,200 a night, for weeks on end, earning
hundreds of thousands of dollars, before having to report a
dime in income. Not even pay taxes on that income, just report
it like every other taxpayer. Reverting to this old system is
not helping gig workers or small businesses or online sellers.
It's not making our tax system fairer or simpler. It is a
potential loophole for wealthy investors.
Now, I have been very clear--the current $600 threshold is
too low. That's why I have introduced legislation, the Cutting
Red Tape for Online Sales Act, with Rep. Chris Pappas, to raise
the threshold to $5,000. This would help cut unnecessary
reporting burdens for small online sellers and taxpayers across
the country. It doesn't make sense for an online platform to
burden taxpayers with additional reporting forms if they are
only making a few hundred dollars per year selling, say, their
old bike on eBay.
But our bill--unlike the one in front of us today--strikes
the right balance between cutting unnecessary paperwork for
average taxpayers and making sure folks can report the income
they earn through online platforms.
While I will be voting NO on this bill today, I hope my
colleagues on the other side will find a way to work with us on
this issue to deliver real, meaningful relief to small online
sellers and taxpayers--without reopening major loopholes in the
tax code.
Dan Kildee
[all]