I 

114TH CONGRESS 

2D SESSION H. R. 5008 

To direct the Secretary of the Treasury to improve tax compliance in the 

construction industry, including clarifying the employment status of service providers in the construction industry, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 20, 2016 

Mr. MACARTHUR (for himself and Mr. KIND) introduced the following bill; 

which was referred to the Committee on Ways and Means 

A BILL 

To direct the Secretary of the Treasury to improve tax 

compliance in the construction industry, including clarifying the employment status of service providers in the 

construction industry, and for other purposes. 

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; FINDINGS; PURPOSES. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Clarify Workers Misclassification in the Construction In6 dustry Act’’. 

7 (b) FINDINGS.—Congress makes the following find8 ings: 


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1 (1) Worker misclassification in the construction 

2 industry has reached epidemic proportions. Studies 

3 from California, Tennessee, Florida, Texas, New 

4 Jersey, and other States detail hundreds of millions 

5 of dollars in lost employment and income taxes be6 cause of improper classification of workers for tax7 ation in the construction industry. New Jersey rev8 enue collection officials have indicated that $535 

9 million in taxes in the State are lost due to worker 

10 misclassification. 

11 (2) Worker misclassification takes place at con12 struction projects involving military bases, hospitals, 

13 universities, convention centers, and major hotels. 

14 (3) There is significant anecdotal evidence that 

15 a large number of workers in the construction indus16 try are currently being misclassified as independent 

17 contractors in order to avoid tax withholding and 

18 other employer responsibilities, but the Internal Rev19 enue Service is barred from issuing rules or guid20 ance to reclassify these workers by section 530 of 

21 the Revenue Act of 1978. 

22 (4) Legitimate construction contractors are un23 able to compete with contractors who avoid employ24 ment and income taxes through misclassification. 

25 This creates competitive pressure on other contracVerDate Sep 11 2014 02:58 Apr 29, 2016 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5008.IH H5008

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1 tors to also misclassify employees to remain competi2 tive. States, leading contractors, and construction 

3 labor leaders agree that government action is needed 

4 to reverse this spiral. 

5 (5) According to the Internal Revenue Service, 

6 a dollar spent on tax enforcement typically yields an 

7 additional six dollars in revenue to the Treasury. 

8 This figure does not include revenue gained from de9 terring misclassification which would increase tax 

10 revenue significantly beyond the level projected. 

11 (c) PURPOSES.—The purposes of this Act are to in12 crease efforts to identify and reduce misclassification, to 

13 prosecute tax evasion in the construction industry, and 

14 provide the Secretary of the Treasury the resources nec15 essary to accomplish these objectives. 

16 SEC. 2. DIRECTIVES AND AUTHORITIES TO IMPROVE TAX 

17 COMPLIANCE IN THE CONSTRUCTION INDUS18 TRY. 

19 (a) ENFORCEMENT ACTIONS.—The Secretary of the 

20 Treasury shall initiate an enforcement initiative aimed at 

21 increasing tax compliance in the construction industry. 

22 Measures taken to implement this initiative shall include: 

23 (1) Consultations with industry experts and 

24 leaders on the scope and priorities of this initiative, 

25 including the Secretary of Labor, State government 


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1 officials, the General Accountability Office, leading 

2 private sector construction organizations, and labor 

3 organizations involved in the construction industry. 

4 (2) Targeted tax audits of major construction 

5 contractors that the Secretary finds reason to believe 

6 may not be in compliance with applicable Federal 

7 tax laws. 

8 (3) Civil and criminal tax enforcement actions 

9 under existing legal authorities. 

10 (4) Educational efforts aimed at entities in the 

11 construction industry to increase voluntary tax com12 pliance. 

13 (b) AUTHORITY TO ISSUE GUIDANCE CLARIFYING

14 EMPLOYMENT STATUS FOR PURPOSES OF EMPLOYMENT

15 TAXES.— 

16 (1) IN GENERAL.—Notwithstanding any other 

17 provision of law including section 530 of the Rev18 enue Act of 1978, the Secretary shall promulgate 

19 rules and issue guidance to reclassify individuals 

20 who are not currently being treated as employees 

21 consistent with the proper classification of employees 

22 under common law standards within the construc23 tion industry. 

24 (2) RESTRICTION TO CONSTRUCTION INDUS25 TRY.—Any rules or guidance under paragraph (1) 


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1 shall apply only with respect to services provided 

2 within the construction industry. 

3 (3) EFFECTIVE DATE.—Any rules or guidance 

4 under paragraph (1) shall not take effect before the 

5 date which is 180 days after the date of the enact6 ment of this Act. 

7 (c) RESOURCES.—The Secretary shall reassign per8 sonnel and resources from other activities to carry out this 

9 Act. 

10 (d) OVERSIGHT AND REVIEW.— 

11 (1) ANNUAL REPORTS BY TREASURY.—The 

12 Secretary shall submit an annual written report to 

13 the Committee on Ways and Means of the House of 

14 Representatives and the Committee on Finance of 

15 the Senate regarding the implementation of this Act 

16 together with any recommendations for further ac17 tion by Congress which would be consistent with the 

18 purposes of this Act. 

19 (2) STUDY AND REPORT BY COMPTROLLER

20 GENERAL.—The Comptroller General of the United 

21 States shall conduct a comprehensive study of the 

22 various forms of tax fraud, including employee 

23 misclassification, in the construction industry, ef24 forts to combat such fraud, and recommendations 

25 for further action. Not later than June 30, 2017, 


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1 the Comptroller General shall submit a written re2 port to the Committee on Ways and Means of the 

3 House of Representatives and the Committee on Fi4 nance of the Senate detailing the results of such 

5 study. 

6 (e) DEFINITIONS.—For purposes of this section— 

7 (1) CONSTRUCTION INDUSTRY.—The term 

8 ‘‘construction industry’’ means all general contrac9 tors and operative builders primarily engaged in the 

10 remodeling, addition, or construction of residential, 

11 farm, industrial, commercial, or other buildings in12 cluding wharves or other structures attached to land. 

13 (2) SECRETARY OF THE TREASURY.—The 

14 terms ‘‘Secretary of the Treasury’’ and ‘‘Secretary’’ 

15 mean the Secretary of the Treasury or the Sec16 retary’s designee. 

17 (f) TERMINATION.—This section, and any rules pro18 mulgated or guidance issued under subsection (b), shall 

19 cease to have any force or effect after September 30, 

20 2021. 

Æ 


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