II

106TH CONGRESS

2D SESSION S. 2979

To amend the Internal Revenue Code of 1986 to clarify the status of professional employer organizations and to promote and protect the interests

of professional employer organizations, their customers, and workers.

IN THE SENATE OF THE UNITED STATES

JULY 27, 2000

Mr. GRAHAM (for himself and Mr. MACK) 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 clarify

the status of professional employer organizations and

to promote and protect the interests of professional employer organizations, their customers, and workers.

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 ‘‘Professional Employer

5 Organization Workers Benefits Act of 2000’’.

6 SEC. 2. NO INFERENCE.

7 Nothing contained in this Act or the amendments

8 made by this Act shall be construed to create any infer-
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1 ence with respect to the determination of who is an em2 ployee or employer—

3 (1) for Federal tax purposes (other than the

4 purposes set forth in the amendments made by sec5 tion 3), or

6 (2) for purposes of any other provision of law.

7 SEC. 3. CERTIFIED PROFESSIONAL EMPLOYER ORGANIZA8 TIONS.

9 (a) EMPLOYMENT TAXES.—Chapter 25 of the Inter10 nal Revenue Code of 1986 (relating to general provisions

11 relating to employment taxes) is amended by adding at

12 the end the following new section:

13 ‘‘SEC. 3511. CERTIFIED PROFESSIONAL EMPLOYER ORGANI14 ZATIONS.

15 ‘‘(a) GENERAL RULES.—For purposes of the taxes

16 imposed by this subtitle—

17 ‘‘(1) a certified professional employer organiza18 tion shall be treated as the employer (and no other

19 person shall be treated as the employer) of any work

20 site employee performing services for any customer

21 of such organization, but only with respect to remu22 neration remitted by such organization to such work

23 site employee, and
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1 ‘‘(2) the exemptions and exclusions which would

2 (but for paragraph (1)) apply shall apply with re3 spect to such taxes imposed on such remuneration.

4 ‘‘(b) SECONDARY CUSTOMER LIABILITY FOR EM5 PLOYMENT TAXES.—

6 ‘‘(1) IN GENERAL.—Notwithstanding subsection

7 (a), if—

8 ‘‘(A) as of the date any payment of taxes

9 imposed by this subtitle is due, the certified

10 professional employer organization does not

11 meet the requirements of paragraph (3),

12 ‘‘(B) the customer has not made adequate

13 payments to the certified professional employer

14 organization pursuant to the service contract

15 under this subtitle with respect to work site em16 ployees performing services for such customer,

17 or

18 ‘‘(C) in accordance with regulations pre19 scribed by the Secretary, the Secretary deter20 mines that the application of this subsection to

21 a class of customers which includes such cus22 tomer is appropriate to prevent an undue and

23 large risk with respect to the ultimate collection

24 of taxes under this subtitle,
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1 the customer shall, subject to paragraph (2), also be

2 liable for any payment under this subtitle which the

3 organization is required to make under this section.

4 ‘‘(2) SPECIAL RULE.—The Secretary shall not

5 take any action against the customer with respect to

6 liability under paragraph (1) until after 45 days—

7 ‘‘(A) after notice and demand by the Sec8 retary against the certified professional em9 ployer organization for taxes due under this

10 subtitle, or

11 ‘‘(B) in the case of a failure to file a re12 turn with respect to such taxes, after such re13 turn was due.

14 ‘‘(3) REQUIREMENTS.—

15 ‘‘(A) IN GENERAL.—An organization meets

16 the requirements of this paragraph with respect

17 to a payment if—

18 ‘‘(i) the organization meets—

19 ‘‘(I) the net worth requirements

20 of subparagraph (B) as of the last

21 day of both the fiscal quarter of the

22 fiscal year of the organization in

23 which the payment is due and the pre24 ceding quarter, or
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1 ‘‘(II) the bond requirements of

2 subparagraph (C) at all times during

3 the fiscal quarter in which the pay4 ment is due, and

5 ‘‘(ii) the organization provides to the

6 Secretary an examination level attestation

7 from an independent certified public ac8 countant not later than the last day of the

9 second month beginning after the end of

10 the calendar quarter in which the payment

11 is due that there is no material reason to

12 question the organization’s assertions with

13 respect to the adequacy of Federal employ14 ment tax payments for such calendar quar15 ter.

16 ‘‘(B) NET WORTH.—The requirements of

17 this subparagraph are as follows:

‘‘If number of work site employees is: Its net worth

must be at

least:

Less than 500 ...................................................................... $50,000.

500 or more but less than 1,500 ......................................... $100,000.

1,500 or more but less than 2,500 ...................................... $150,000.

2,500 or more but less than 4,000 ...................................... $200,000.

4,000 or greater ................................................................... $250,000.

18 ‘‘(C) BOND.—An organization meets the

19 requirements of this subparagraph if such orga20 nization posts a bond for the payment of taxes

21 under this subtitle in a form acceptable to the
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1 Secretary and in an amount equal to the

2 amount described in subparagraph (B) with re3 spect to such organization.

4 ‘‘(D) FAILURE TO FILE.—If the certified

5 professional employer organization fails to file

6 the attestation required by subparagraph (A)(ii)

7 with respect to a particular quarter, then the

8 requirements of this paragraph with respect to

9 such failure shall be treated as not satisfied for

10 the period beginning on the due date for such

11 attestation and ending on the first day of the

12 first calendar quarter following 2 consecutive

13 calendar quarters (beginning after the failure)

14 for which such attestation requirement is met.

15 ‘‘(E) EXCLUSION OF GOODWILL AND

16 OTHER INTANGIBLES.—For purposes of this

17 paragraph, net worth shall be determined with18 out regard to goodwill and other intangibles.

19 ‘‘(4) SUCCESSOR EMPLOYER STATUS.—For pur20 poses of sections 3121(a) and 3306(b)(1)—

21 ‘‘(A) a certified professional employer or22 ganization entering into a service contract with

23 a customer with respect to a work site employee

24 shall be treated as a successor employer and the
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1 customer shall be treated as a predecessor em2 ployer, and

3 ‘‘(B) a customer whose service contract

4 with a certified professional employer organiza5 tion is terminated with respect to a work site

6 employee shall be treated as a successor em7 ployer and the certified professional employer

8 organization shall be treated as a predecessor

9 employer.

10 ‘‘(c) LIABILITY WITH RESPECT TO INDIVIDUALS

11 PURPORTED TO BE WORK SITE EMPLOYEES.—

12 ‘‘(1) GENERAL RULES.—Solely for purposes of

13 its liability for the taxes imposed by this subtitle—

14 ‘‘(A) the certified professional employer or15 ganization shall be treated as the employer of

16 any individual (other than a work site em17 ployee) who is performing services covered by a

18 contract meeting the requirements of section

19 7705(d)(2)(F), but only with respect to remu20 neration remitted by such organization to such

21 individual, and

22 ‘‘(B) the exemptions and exclusions which

23 would (but for subparagraph (A)) apply shall

24 apply with respect to such taxes imposed on

25 such remuneration.
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1 ‘‘(2) LIABILITY.—Paragraph (1) shall not be

2 construed to relieve liability of any other individual

3 or entity for such taxes.

4 ‘‘(d) SPECIAL RULE FOR RELATED PARTY.—Sub5 sections (a) and (b) shall not apply in the case of a cus6 tomer which bears a relationship to a certified professional

7 employer organization described in section 267(b) or

8 707(b). For purposes of the preceding sentence, such sec9 tions shall be applied by substituting ‘10 percent’ for ‘50

10 percent’.

11 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

12 such regulations as may be necessary or appropriate to

13 carry out the purposes of this section, including—

14 ‘‘(1) rules for the appropriate allocation (includ15 ing on a pro rata basis) of payments of taxes made

16 by professional employee organizations among cus17 tomers also liable for such taxes, and

18 ‘‘(2) rules for applying this section to profes19 sional employee organizations which are not in exist20 ence for quarters preceding the quarter in which a

21 service contract under section 7705(d)(2)) is in ef22 fect.’’

23 (b) EMPLOYEE BENEFITS.—Section 414 of such

24 Code (relating to definitions and special rules) is amended

25 by adding at the end the following new subsection:
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1 ‘‘(v) CERTIFIED PROFESSIONAL EMPLOYER ORGANI2 ZATIONS.—

3 ‘‘(1) PLANS MAINTAINED BY CERTIFIED PRO4 FESSIONAL EMPLOYER ORGANIZATIONS.—

5 ‘‘(A) IN GENERAL.—Except as otherwise

6 provided in this subsection, if a certified profes7 sional employer organization establishes or

8 maintains a plan to provide employee benefits

9 to work site employees, then, for purposes of

10 applying the provisions of this title applicable to

11 such benefits—

12 ‘‘(i) such plan shall be treated as a

13 single employer plan established and main14 tained by the organization,

15 ‘‘(ii) the organization shall be treated

16 as the employer of the work site employees

17 eligible to participate in the plan, and

18 ‘‘(iii) the portion of such plan covering

19 work site employees shall not be taken into

20 account in applying such provisions to the

21 remaining portion of such plan or to any

22 other plan providing employee benefits

23 (other than to work site employees).

24 ‘‘(B) SPECIAL EXCEPTIONS IN APPLYING

25 RULES TO BENEFITS.—
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1 ‘‘(i) IN GENERAL.—In applying any

2 requirement listed in clause (iii)—

3 ‘‘(I) the portion of the plan es4 tablished by the certified professional

5 employer organization which covers

6 work site employees performing serv7 ices for a customer shall be treated as

8 a separate plan of the customer (in9 cluding for purposes of any disquali10 fication or correction),

11 ‘‘(II) the customer shall be treat12 ed as establishing and maintaining

13 the plan, as the employer of such em14 ployees, and as having paid any com15 pensation remitted by the certified

16 professional employer organization to

17 such employees under the service con18 tract entered into under section

19 7705(d), and

20 ‘‘(III) a controlled group that in21 cludes a certified professional em22 ployer organization shall not include

23 in the controlled group any work site

24 employees performing services for a

25 customer.
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1 For purposes of subclause (III), all persons

2 treated as a single employer under sub3 sections (b), (c), (m), and (o) shall be

4 treated as members of the same controlled

5 group.

6 ‘‘(ii) SELF-EMPLOYED INDIVID7 UALS.—A work site employee who would

8 be treated as a self-employed individual (as

9 defined in section 401(c)(1)), a disqualified

10 person (as defined in section 4975(e)(2)),

11 or a shareholder-employee (as defined in

12 section 4975(f)(6)(C)), but for the rela13 tionship with the certified professional em14 ployer organization, shall be treated as a

15 self-employed individual for purposes of de16 termining eligibility for employee benefit

17 plans maintained by such certified profes18 sional employer organization.

19 ‘‘(iii) LISTED REQUIREMENTS.—The

20 requirements listed in this clause are—

21 ‘‘(I) NONDISCRIMINATION.—Sec22 tions 79(d), 105(h), 125(b), 127(b),

23 129(d), 132(j)(1), 274(j)(3)(B),

24 401(a)(4), 401(a)(17), 401(a)(26),
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1 401(k)(3), 401(m)(2), 410(b), 414(q),

2 415, 416, 422, 423(b), and 505(b).

3 ‘‘(II) SIZE.—Sections 220,

4 401(k)(11), 401(m)(10), 408(k), and

5 408(p).

6 ‘‘(III) ELIGIBILITY.—Section

7 401(k)(4)(B).

8 ‘‘(2) PLANS MAINTAINED BY CUSTOMERS OF

9 CERTIFIED PROFESSIONAL EMPLOYER ORGANIZA10 TIONS.—If a customer of a certified professional em11 ployer organization provides (other than through

12 such organization) any employee benefits, then with

13 respect to such benefits—

14 ‘‘(A) work site employees of the organiza15 tion who perform services for the customer shall

16 be treated as leased employees of such cus17 tomer,

18 ‘‘(B) such customer shall be treated as a

19 recipient for purposes of subsection (n), and

20 paragraphs (4) and (5) of subsection (n) shall

21 not apply for such purposes, and

22 ‘‘(C) with respect to such work site em23 ployees, sections 105(h), 403(b)(12), 422, and

24 423 shall be treated as a benefit listed in sub25 section (n)(3)(C).
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1 ‘‘(3) PLANS MAINTAINED BY COMPANIES IN

2 SAME CONTROLLED GROUP AS CERTIFIED PROFES3 SIONAL EMPLOYER ORGANIZATION.—In applying any

4 requirement listed in paragraph (1)(B)(iii), a con5 trolled group which includes a certified professional

6 employer organization shall not include in such con7 trolled group any work site employees performing

8 services for a customer. For purposes of this para9 graph, all persons treated as a single employer

10 under subsections (b), (c), (m) and (o) shall be

11 treated as members of the same controlled group.

12 ‘‘(4) RULES APPLICABLE TO PLANS MAIN13 TAINED BY CERTIFIED PROFESSIONAL EMPLOYER

14 ORGANIZATIONS AND PLANS MAINTAINED BY THEIR

15 CUSTOMERS.—

16 ‘‘(A) SERVICE CREDITING FOR PARTICIPA17 TION AND VESTING PURPOSES.—In the case of

18 a plan maintained by a certified professional

19 employer organization or a customer, for pur20 poses of determining a work site employee’s

21 service for eligibility to participate and vesting

22 under sections 410(a) and 411, rules similar to

23 the rules of paragraphs (1) and (3) of section

24 413(c) shall apply to service for the certified
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1 professional employer organization and cus2 tomer.

3 ‘‘(B) COMPENSATION.—

4 ‘‘(i) IN GENERAL.—Except as pro5 vided in clause (ii), for purposes of sub6 section (s) and section 415(c)(3), or other

7 comparable provisions of this title based on

8 compensation which affects employee ben9 efit plans, compensation received from the

10 customer with respect to which the work

11 site employee performs services shall be

12 taken into account together with com13 pensation received from the certified pro14 fessional employer organization.

15 ‘‘(ii) EXCEPTION.—For purposes of

16 applying sections 404 and 412 to a plan

17 maintained by a certified professional em18 ployer organization, only compensation re19 ceived from the certified professional em20 ployer organization shall be taken into ac21 count.

22 ‘‘(5) SPECIAL RULES WHERE MULTIPLE

23 PLANS.—

24 ‘‘(A) IN GENERAL.—For purposes of ap25 plying section 415 with respect to a plan main-
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1 tained by a certified professional employer orga2 nization, the organization and customers of

3 such organization shall be treated as a single

4 employer, except that if plans are maintained

5 by a certified professional employer organiza6 tion and a customer with respect to a work site

7 employee, any action required to be taken by

8 such plans shall be taken first with respect to

9 the plan maintained by the customer.

10 ‘‘(B) MINIMUM BENEFIT.—If a minimum

11 benefit is required to be provided under section

12 416, such benefit shall, to the extent possible,

13 be provided through the plan maintained by the

14 certified professional employer organization.

15 ‘‘(6) TERMINATION OF SERVICE CONTRACT BE16 TWEEN CERTIFIED PROFESSIONAL EMPLOYER ORGA17 NIZATION AND CUSTOMER.—

18 ‘‘(A) IN GENERAL.—

19 ‘‘(i) TREATMENT OF SUCCESSOR

20 PLAN.—If a service contract between a

21 customer and a certified professional em22 ployer organization is terminated and work

23 site employees of the customer were cov24 ered by a plan maintained by the organiza25 tion, then, except as provided in regula-
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1 tions, any plan of a certified professional

2 employer organization or the customer

3 which covers such work site employees

4 shall be treated as a successor plan.

5 ‘‘(ii) TREATMENT AS SEVERANCE

6 FROM EMPLOYMENT AND SEPARATION

7 FROM SERVICE.—If a service contract be8 tween a customer and a certified profes9 sional employer organization is terminated,

10 and there is no plan treated as a successor

11 plan under clause (i), then such termi12 nation shall be treated as a severance from

13 employment and a separation from service

14 of each work site employee of such cus15 tomer.

16 ‘‘(B) DISTRIBUTION RULES APPLICABLE

17 TO SUBPARAGRAPH (A)(ii).—In any case to

18 which subparagraph (A)(ii) applies, the certified

19 professional employer organization plan may

20 distribute—

21 ‘‘(i) during the 2-year period begin22 ning on the date of such termination (in

23 accordance with plan terms) only—

24 ‘‘(I) elective deferrals,
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1 ‘‘(II) qualified nonelective con2 tributions (within the meaning of sec3 tion 401(m)(4)(C)), and

4 ‘‘(III) matching contributions de5 scribed in section 401(k)(3)(D)(ii)(I),

6 of former work site employees associated

7 with the terminated customer only in a di8 rect rollover described in section

9 401(a)(31), and

10 ‘‘(ii) after such 2-year period,

11 amounts in such plan in accordance with

12 plan terms.’’

13 (c) CERTIFIED PROFESSIONAL EMPLOYER ORGANI14 ZATION DEFINED.—Chapter 79 of such Code (relating to

15 definitions) is amended by adding at the end the following

16 new section:

17 ‘‘SEC. 7705. CERTIFIED PROFESSIONAL EMPLOYER ORGANI18 ZATIONS.

19 ‘‘(a) IN GENERAL.—For purposes of this title, the

20 term ‘certified professional employer organization’ means

21 a person who applies to be treated as a certified profes22 sional employer organization for purposes of sections

23 414(v) and 3511 and who has been certified by the Sec24 retary as meeting the requirements of subsection (b).
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1 ‘‘(b) CERTIFICATION.—A person meets the require2 ments of this subsection if such person—

3 ‘‘(1) demonstrates that such person (and any

4 owner, officer, and such other persons as may be

5 specified in regulations) meets such requirements as

6 the Secretary shall establish with respect to tax sta7 tus, background, experience, business location, and

8 annual financial audits,

9 ‘‘(2) represents that it will provide the Sec10 retary within 6 months after the close of each fiscal

11 year of such person ending after certification pursu12 ant to this section with an opinion of an independent

13 certified public accountant as to whether the cer14 tified professional employer organization’s financial

15 statements are presented fairly in accordance with

16 generally accepted accounting principles,

17 ‘‘(3) represents that it will satisfy such report18 ing obligations as may be imposed by the Secretary,

19 ‘‘(4) represents that it will maintain a qualified

20 plan (as defined in section 408(p)(2)(D)(ii)) or an

21 arrangement to provide simple retirement accounts

22 (within the meaning of section 408(p)) which benefit

23 at least 95 percent of all its work site employees,

24 and
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1 ‘‘(5) agrees to notify the Secretary in writing of

2 any change that affects the continuing accuracy of

3 any representation or information which was pre4 viously made or provided.

5 ‘‘(c) SUSPENSION AND REVOCATION AUTHORITY.—

6 The Secretary may suspend or revoke a certification of

7 any person under subsection (b) for purposes of section

8 414(v) or 3511, or both, if the Secretary determines that

9 such person is not satisfying the requirements or represen10 tations of subsection (b) or fails to satisfy applicable re11 porting, payment, or deposit requirements.

12 ‘‘(d) WORK SITE EMPLOYEE.—For purposes of this

13 title—

14 ‘‘(1) IN GENERAL.—The term ‘work site em15 ployee’ means, with respect to a certified profes16 sional employer organization, an individual who—

17 ‘‘(A) performs services for a customer pur18 suant to a contract which is between such cus19 tomer and the certified professional employer

20 organization and which meets the requirements

21 of paragraph (2), and

22 ‘‘(B) performs services at a work site

23 meeting the requirements of paragraph (3).

24 ‘‘(2) SERVICE CONTRACT REQUIREMENTS.—A

25 contract meets the requirements of this paragraph
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1 with respect to an individual performing services for

2 a customer if such contract is in writing and pro3 vides that the certified professional employer organi4 zation shall—

5 ‘‘(A) assume responsibility for payment of

6 wages to the individual, without regard to the

7 receipt or adequacy of payment from the cus8 tomer for such services,

9 ‘‘(B) assume responsibility for reporting,

10 withholding, and paying any applicable taxes

11 under subtitle C, with respect to the individ12 ual’s wages, without regard to the receipt or

13 adequacy of payment from the customer for

14 such services,

15 ‘‘(C) assume responsibility for any em16 ployee benefits which the service contract may

17 require the certified professional employer orga18 nization to provide, without regard to the re19 ceipt or adequacy of payment from the cus20 tomer for such services,

21 ‘‘(D) assume shared responsibility with the

22 customer for firing the individual and for re23 cruiting and hiring any new worker,

24 ‘‘(E) maintain employee records relating to

25 the individual, and
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1 ‘‘(F) agree to be treated as a certified pro2 fessional employer organization for purposes of

3 sections 414(v) and 3511 with respect to such

4 individual.

5 ‘‘(3) WORK SITE COVERAGE REQUIREMENT.—

6 ‘‘(A) IN GENERAL.—The requirements of

7 this paragraph are met with respect to an indi8 vidual if at least 85 percent of the individuals

9 performing services for the customer at the

10 work site where such individual performs serv11 ices are subject to 1 or more contracts with the

12 certified professional employer organization

13 which meet the requirements of paragraph (2).

14 ‘‘(B) SPECIAL RULES.—For purposes of

15 subparagraph (A)—

16 ‘‘(i) WORK SITE.—The term ‘work

17 site’ means a physical location at which an

18 individual generally performs service for

19 the customer or, if there is no such loca20 tion, the location from which the individual

21 receives job assignments from the cus22 tomer.

23 ‘‘(ii) CONTIGUOUS LOCATIONS.—For

24 purposes of clause (i), work sites which are
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1 contiguous locations shall be treated as a

2 single physical location.

3 ‘‘(iii) NONCONTIGUOUS LOCATIONS.—

4 For purposes of clause (i), noncontiguous

5 locations shall be treated as separate work

6 sites, except that each work site within a

7 reasonably proximate area must satisfy the

8 85 percent test under subparagraph (A)

9 for the individuals performing services for

10 the customer at such work site. In deter11 mining whether noncontiguous locations

12 are reasonably proximate, all facts and cir13 cumstances shall be taken into account.

14 ‘‘(iv) WORK SITES 35 MILES OR MORE

15 APART.—Any work site which is separated

16 from all other customer work sites by at

17 least 35 miles shall not be treated as rea18 sonably proximate under clause (iii).

19 ‘‘(v) DIFFERENT INDUSTRY.—A work

20 site shall not be treated as reasonably

21 proximate to another work site under

22 clause (iii) if the work site operates in a

23 different industry or industries or for a

24 different business purpose from such other

25 work site as determined by the Secretary.
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1 ‘‘(e) EMPLOYER AGGREGATION RULES.—

2 ‘‘(1) IN GENERAL.—For purposes of sub3 sections (b)(4) and (d), all persons treated as a sin4 gle employer under subsection (b), (c), (m), or (o)

5 of section 414 shall be treated as 1 person.

6 ‘‘(2) QUALIFIED PLANS.—For purposes of sub7 section (b)(4)—

8 ‘‘(A) a qualified plan (as defined in section

9 408(p)(2)(D)(ii)) which is maintained by, or an

10 arrangement to provide a simple retirement ac11 count (within the meaning of section 408(p))

12 to, a customer with respect to a work site em13 ployee performing services for such customer

14 shall be treated as if it were maintained by the

15 applicant, and

16 ‘‘(B) work site employees who do not meet

17 the minimum age and service requirements of

18 section 410(a)(1)(A) (or who are excludable

19 from consideration under section 410(b)(3))

20 shall not be taken into account.

21 ‘‘(f) DETERMINATION OF EMPLOYMENT STATUS.—

22 Except to the extent necessary for purposes of section

23 414(v) or 3511, nothing in this section shall be construed

24 to affect the determination of who is an employee or em25 ployer for purposes of this title.
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1 ‘‘(g) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be necessary or appropriate to

3 carry out the purposes of this section and sections 414(v)

4 and 6503(k).’’

5 (d) CONFORMING AMENDMENTS.—

6 (1) Section 3302 of such Code is amended by

7 adding at the end the following new subsection:

8 ‘‘(h) TREATMENT OF PROFESSIONAL EMPLOYER OR9 GANIZATIONS.—If a certified professional employer orga10 nization (as defined in section 7705) (or a client of such

11 organization) makes a payment to the State’s unemploy12 ment fund with respect to a work site employee, such orga13 nization shall be eligible for the credits available under

14 this section with respect to such payment.’’

15 (2) Section 3303(a) of such Code is amended—

16 (A) by inserting ‘‘and’’ at the end of para17 graph (3),

18 (B) by inserting immediately after para19 graph (3) the following new paragraph:

20 ‘‘(4) the reduced rates of contributions per21 mitted by paragraphs (1), (2), and (3) are available

22 to a certified professional employer organization (as

23 defined in section 7705) for contributions by such

24 entity (or a client) paid with respect to a work site
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1 employee into a State unemployment fund during

2 the taxable year.’’, and

3 (C) in the last sentence—

4 (i) by striking ‘‘paragraphs (1), (2),

5 and (3)’’ and inserting ‘‘paragraphs (1),

6 (2), (3), and (4)’’, and

7 (ii) by striking ‘‘paragraph (1), (2), or

8 (3)’’ and inserting ‘‘paragraph (1), (2),

9 (3), or (4)’’.

10 (3) Section 6503 of such Code is amended by

11 redesignating subsection (k) as subsection (l) and by

12 inserting after subsection (j) the following new sub13 section:

14 ‘‘(k) EXTENSION IN CASE OF CUSTOMERS WITH LI15 ABILITY.—With respect to any liability of a customer

16 under section 3511(b), the period of limitation for the as17 sessment of any tax imposed under subtitle C shall not

18 expire before the date which is 1 year after the date it

19 would otherwise expire.’’

20 (e) CLERICAL AMENDMENTS.—

21 (1) The table of sections for chapter 25 of such

22 Code is amended by adding at the end the following

23 new item:

‘‘Sec. 3511. Certified professional employer organizations.’’
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1 (2) The table of sections for chapter 79 of such

2 Code is amended by inserting after the item relating

3 to section 7704 the following new item:

‘‘Sec. 7705. Certified professional employer organizations.’’

4 (f) REPORTING REQUIREMENTS AND OBLIGA5 TIONS.—The Secretary of the Treasury shall develop such

6 reporting and recordkeeping rules, regulations, and proce7 dures as the Secretary determines necessary or appro8 priate to ensure compliance with the amendments made

9 by this Act with respect to entities applying for certifi10 cation as certified professional employer organizations or

11 entities that have been so certified. Such rules shall re12 quire the certified professional employer organizations to

13 report to customers whether they have filed the attesta14 tions required by section 3511(b)(3) of the Internal Rev15 enue Code of 1986 (as added by this section). Such rules

16 shall, however, be designed in a manner which streamlines,

17 to the extent possible, the application of requirements of

18 such amendments, the exchange of information between

19 a certified professional employer organization and its cus20 tomers, and the reporting and recordkeeping obligations

21 of the certified professional employer organization.

22 (g) EFFECTIVE DATES.—

23 (1) IN GENERAL.—The amendments made by

24 this Act shall take effect on the later of—

25 (A) January 1, 2002, or
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1 (B) the January 1st of the first calendar

2 year beginning more than 12 months after the

3 date of the enactment of this Act.

4 (2) CERTIFICATION PROGRAM.—The Secretary

5 of the Treasury shall establish the certification pro6 gram described in section 7705(b) of the Internal

7 Revenue Code of 1986 not later than 3 months be8 fore the effective date determined under paragraph

9 (1).

10 (3) TRANSITION ISSUES.—Subject to such con11 ditions as the Secretary of the Treasury may pre12 scribe, employee benefit plans in existence on the

13 date of the enactment of this Act shall not be treat14 ed as failing to meet the requirements of the Inter15 nal Revenue Code of 1986 merely because such

16 plans were maintained by an organization prior to

17 such organization becoming a certified professional

18 employer organization (as defined by section 7705 of

19 such Code (as added by section 3 of this Act)).

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