II 

118TH CONGRESS 

1ST SESSION S. 45 

To amend the Internal Revenue Code of 1986 to simplify reporting requirements, promote tax compliance, and reduce tip reporting compliance 

burdens in the beauty service industry. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 24 (legislative day, JANUARY 3), 2023 

Mr. CARDIN (for himself and Mr. SCOTT of South Carolina) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to simplify 

reporting requirements, promote tax compliance, and reduce tip reporting compliance burdens in the beauty service industry. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Tax 

5 Fairness and Compliance Simplification Act’’. 


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1 SEC. 2. EXTENSION OF CREDIT FOR PORTION OF EM2 PLOYER SOCIAL SECURITY TAXES PAID WITH 

3 RESPECT TO EMPLOYEE TIPS TO BEAUTY 

4 SERVICE ESTABLISHMENTS. 

5 (a) EXTENSION OF TIP CREDIT TO BEAUTY SERVICE

6 BUSINESS.— 

7 (1) IN GENERAL.—Section 45B(b)(2) of the In8 ternal Revenue Code of 1986 is amended to read as 

9 follows: 

10 ‘‘(2) APPLICATION ONLY TO CERTAIN LINES OF

11 BUSINESS.—In applying paragraph (1) there shall 

12 be taken into account only tips received from cus13 tomers or clients in connection with the following 

14 services: 

15 ‘‘(A) The providing, delivering, or serving 

16 of food or beverages for consumption, if the tip17 ping of employees delivering or serving food or 

18 beverages by customers is customary. 

19 ‘‘(B) The providing of beauty services to a 

20 customer or client if the tipping of employees 

21 providing such services is customary.’’. 

22 (2) BEAUTY SERVICE DEFINED.—Section 45B 

23 of such Code is amended by adding at the end the 

24 following new subsection: 

25 ‘‘(e) BEAUTY SERVICE.—For purposes of this sec26 tion, the term ‘beauty service’ means any of the following: 


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1 ‘‘(1) Barbering and hair care. 

2 ‘‘(2) Nail care. 

3 ‘‘(3) Esthetics. 

4 ‘‘(4) Body and spa treatments.’’. 

5 (b) CREDIT DETERMINED WITH RESPECT TO MIN6 IMUM WAGE IN EFFECT.—Section 45B(b)(1)(B) of the 

7 Internal Revenue Code of 1986 is amended— 

8 (1) by striking ‘‘as in effect on January 1, 

9 2007, and’’; and 

10 (2) by inserting ‘‘, and in the case of food or 

11 beverage establishments, as in effect on January 1, 

12 2007’’ after ‘‘without regard to section 3(m) of such 

13 Act’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to taxable years beginning after 

16 December 31, 2023. 

17 SEC. 3. EMPLOYER TIP REPORTING SAFE HARBOR. 

18 (a) IN GENERAL.—Section 3121(q) of the Internal 

19 Revenue Code of 1986 is amended— 

20 (1) by striking so much as precedes ‘‘of this 

21 chapter’’ and inserting the following: 

22 ‘‘(q) TIPS INCLUDED FOR BOTH EMPLOYEE AND

23 EMPLOYER TAXES.— 

24 ‘‘(1) IN GENERAL.—For purposes’’; and 


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1 (2) by adding at the end the following new 

2 paragraph: 

3 ‘‘(2) TIP PROGRAM SAFE HARBOR.—In the case 

4 of an employer who employs one or more employees 

5 who receive tips in the course of such employment 

6 which are attributable to the performance of beauty 

7 services (as such term is defined in section 45B) are 

8 considered remuneration for such employment under 

9 this section, no IRS tip examination with respect to 

10 such employer shall be initiated (except in the case 

11 of a tip examination of a current or former em12 ployee) if the employer— 

13 ‘‘(A) establishes an educational program 

14 regarding applicable laws relating to proper re15 porting of tips received by employees for— 

16 ‘‘(i) new employees, which shall in17 clude both verbal explanation and written 

18 materials, and 

19 ‘‘(ii) existing employees, which shall 

20 be conducted quarterly, 

21 ‘‘(B) establishes procedures for tipped em22 ployees to provide monthly reporting of cash 

23 and charged services and related tip income of 

24 at least $20 under section 6053(a), 


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1 ‘‘(C) complies with all applicable Federal 

2 tax law requirements applicable to employers 

3 for purposes of filing returns, and collection 

4 and payment of taxes imposed, with respect to 

5 tip income received by employees, and 

6 ‘‘(D) maintains employee records related 

7 to— 

8 ‘‘(i) contact information for such em9 ployees, and 

10 ‘‘(ii) gross receipts from any services 

11 subject to tipping, and charge receipts for 

12 such services, for a period of not less than 

13 4 calendar years after the calendar year to 

14 which the records relate.’’. 

15 (b) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years beginning after 

17 December 31, 2023. 

18 SEC. 4. INFORMATION REPORTING OF INCOME FROM 

19 SPACE RENTALS IN THE BEAUTY SERVICE IN20 DUSTRY. 

21 (a) IN GENERAL.—Subpart B of part III of sub22 chapter A of chapter 61 of the Internal Revenue Code of 

23 1986, as amended by section 334(d) of Public Law 117– 

24 328, is amended by adding at the end the following new 

25 section: 


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1 ‘‘SEC. 6050AA. RETURNS RELATING TO INCOME FROM CER2 TAIN RENTALS OF SPACE IN THE BEAUTY 

3 SERVICE INDUSTRY. 

4 ‘‘(a) REQUIREMENT OF REPORTING.—Any person 

5 who, in the course of a trade or business and for any cal6 endar year, receives rental payments from two or more 

7 individuals providing beauty services (as defined in section 

8 45B(e)) aggregating $600 or more each for the lease of 

9 space to provide such services to third-party patrons shall 

10 make the return described in subsection (b) with respect 

11 to each person from whom such rent was so received at 

12 such time as the Secretary may by regulations prescribe. 

13 ‘‘(b) RETURN.—A return is described in this sub14 section if such return— 

15 ‘‘(1) is in such form as the Secretary may pre16 scribe, and 

17 ‘‘(2) contains— 

18 ‘‘(A) the name, address, and TIN of each 

19 person from whom a rental payment described 

20 in subsection (a) was received during the cal21 endar year, 

22 ‘‘(B) the aggregate amount of such pay23 ments received by such person during such cal24 endar year and the date and amount of each 

25 such payment, and 


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1 ‘‘(C) such other information as the Sec2 retary may require. 

3 ‘‘(c) STATEMENT TO BE FURNISHED TO PERSONS

4 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 

5 ‘‘(1) IN GENERAL.—Every person required to 

6 make a return under subsection (a) shall furnish to 

7 each person whose name is required to be set forth 

8 in such return a written statement showing— 

9 ‘‘(A) the name, address, and phone num10 ber of the information contact of the person re11 quired to make such a return, and 

12 ‘‘(B) the aggregate amount of payments to 

13 the person required to be shown on the return. 

14 ‘‘(2) FURNISHING OF INFORMATION.—The 

15 written statement required under paragraph (1) 

16 shall be furnished to the person on or before Janu17 ary 31 of the year following the calendar year for 

18 which the return under subsection (a) is required to 

19 be made. 

20 ‘‘(d) REGULATIONS AND GUIDANCE.—The Secretary 

21 may prescribe such regulations and other guidance as may 

22 be appropriate or necessary to carry out the purpose of 

23 this subsection, including rules to prevent duplicative re24 porting of transactions.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of sections 

2 for subchapter A of chapter 61 of such Code is amended 

3 by adding at the end the following new item: 

‘‘Sec. 6050AA. Returns relating to income from certain rentals of space in the 

beauty service industry.’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to payments made after December 

6 31, 2023. 

7 SEC. 5. GAO STUDY. 

8 Not later than 5 years after the date of enactment 

9 of this Act, the Comptroller General shall conduct a study 

10 and submit to the Committee on Small Business and En11 trepreneurship of the Senate and the Committee on Fi12 nance of the Senate a report detailing how the extension 

13 of the employer social security credit under section 45B 

14 of the Internal Revenue Code of 1986 (as amended by sec15 tion 2 of this Act) has impacted employers and employees 

16 with respect to Federal income tax compliance and bene17 fits. 

Æ 


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