I 

110TH CONGRESS 

2D SESSION H. R. 5804 

To amend the Internal Revenue Code of 1986 to modify the rules relating 

to the treatment of individuals as independent contractors or employees, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 15, 2008 

Mr. MCDERMOTT (for himself, Mr. TIERNEY, Mr. NEAL of Massachusetts, 

Mr. STARK, Mr. LEWIS of Georgia, Mr. DOGGETT, Mr. EMANUEL, Mr. 

PASCRELL, Ms. BERKLEY, Mr. CROWLEY, Ms. SCHWARTZ, Mr. DAVIS of 

Alabama, Ms. DELAURO, Mr. GEORGE MILLER of California, Ms. LINDA

T. SA ́NCHEZ of California, Mr. HARE, Ms. SUTTON, Mr. HONDA, Mr. 

HIGGINS, Mr. BRADY of Pennsylvania, Mr. GRIJALVA, Mr. CUMMINGS, 

Mr. KAGEN, and Mr. LEVIN) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

the rules relating to the treatment of individuals as independent contractors or employees, 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. 

4 This Act may be cited as the ‘‘Taxpayer Responsi5 bility, Accountability, and Consistency Act of 2008’’. 


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1 SEC. 2. INFORMATION REPORTING FOR PAYMENTS TO COR2 PORATIONS. 

3 (a) IN GENERAL.—Section 6041 of the Internal Rev4 enue Code of 1986 (relating to information at source) is 

5 amended by adding at the end the following new sub6 section: 

7 ‘‘(h) PAYMENTS TO CORPORATIONS.— 

8 ‘‘(1) IN GENERAL.—Notwithstanding any regu9 lations prescribed by the Secretary before the date 

10 of the enactment of this subsection, subsection (a) 

11 shall apply to payments made to a corporation. 

12 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

13 apply to payments made to a hospital or extended 

14 care facility described in section 501(c)(3) which is 

15 exempt from taxation under section 501(a) or to a 

16 hospital or extended care facility owned and oper17 ated by the United States, a State, the District of 

18 Columbia, a possession of the United States, or a 

19 political subdivision, agency or instrumentality of 

20 any of the foregoing.’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to payments made more than 1 

23 year after the date of the enactment of this Act. 


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1 SEC. 3. DETERMINATION OF ELIGIBILITY FOR SAFE HAR2 BOR TREATMENT OF INDIVIDUALS AS NON3 EMPLOYEES FOR PURPOSES OF EMPLOY4 MENT TAXES. 

5 (a) IN GENERAL.—Chapter 25 of the Internal Rev6 enue Code of 1986 (relating to general provisions relating 

7 to employment taxes) is amended by adding at the end 

8 the following new section: 

9 ‘‘SEC. 3511. SAFE HARBOR. 

10 ‘‘(a) TERMINATION OF CERTAIN EMPLOYMENT TAX

11 LIABILITY.— 

12 ‘‘(1) IN GENERAL.—If— 

13 ‘‘(A) for purposes of employment taxes, the 

14 taxpayer did not treat an individual as an em15 ployee for any period, and 

16 ‘‘(B) in the case of periods after December 

17 31, 1978, all Federal tax returns (including in18 formation returns) required to be filed by the 

19 taxpayer with respect to such individual for 

20 such period are filed on a basis consistent with 

21 the taxpayer’s treatment of such individual as 

22 not being an employee, 

23 then, for purposes of applying such taxes for such 

24 period with respect to the taxpayer, the individual 

25 shall be deemed not to be an employee unless the 

26 taxpayer had no reasonable basis for not treating 


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1 such individual as an employee. This paragraph shall 

2 not apply with respect to an individual for any peri3 ods beginning after the date of notice of a deter4 mination that such individual should be treated as 

5 an employee of the taxpayer. 

6 ‘‘(2) STATUTORY STANDARDS FOR SATISFYING

7 THE REQUIREMENTS OF PARAGRAPH (1).—For pur8 poses of paragraph (1), a taxpayer shall be treated 

9 as having a reasonable basis for not treating an indi10 vidual as an employee only if— 

11 ‘‘(A) the taxpayer’s treatment of such indi12 vidual was in reasonable reliance on— 

13 ‘‘(i) a written determination (as de14 fined in section 6110(b)(1)) issued to the 

15 taxpayer addressing the employment status 

16 of such individual or another individual 

17 holding a substantially similar position 

18 with the taxpayer, or 

19 ‘‘(ii) a concluded examination (for em20 ployment tax purposes) of whether such in21 dividual (or another individual holding a 

22 substantially similar position) should be 

23 treated as an employee of the taxpayer, 

24 with respect to which there was no deter25 mination that such individual (or another 


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1 individual holding a substantially similar 

2 position) should be treated as an employee, 

3 and 

4 ‘‘(B) the taxpayer (or a predecessor) has 

5 not treated any other individual holding a sub6 stantially similar position as an employee for 

7 purposes of employment taxes for any period 

8 beginning after December 31, 1977. 

9 ‘‘(b) DEFINITIONS.—For purposes of this section— 

10 ‘‘(1) EMPLOYMENT TAX.—The term ‘employ11 ment tax’ means any tax imposed by this subtitle. 

12 ‘‘(2) EMPLOYMENT STATUS.—The term ‘em13 ployment status’ means the status of an individual, 

14 under the usual common law rules applicable in de15 termining the employer-employee relationship, as an 

16 employee or as an independent contractor (or other 

17 individual who is not an employee). 

18 ‘‘(c) SPECIAL RULES FOR APPLICATION OF SEC19 TION.— 

20 ‘‘(1) NOTICE OF AVAILABILITY OF SECTION.— 

21 An officer or employee of the Internal Revenue Serv22 ice shall, before or at the commencement of any ex23 amination relating to the employment status of one 

24 or more individuals who perform services for the taxVerDate Aug 31 2005 23:17 Apr 18, 2008 Jkt 069200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5804.IH H5804

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1 payer, provide the taxpayer with a written notice of 

2 the provisions of this section. 

3 ‘‘(2) RULES RELATING TO STATUTORY STAND4 ARDS.—For purposes of subsection (a)(2), with re5 spect to any period beginning after the date of the 

6 enactment of this paragraph, a taxpayer may not 

7 rely on an examination commenced, or a written de8 termination issued, more than 7 years before the be9 ginning of such period. 

10 ‘‘(3) SUBSTANTIALLY SIMILAR POSITION.—For 

11 purposes of this section, the determination as to 

12 whether an individual holds a position substantially 

13 similar to a position held by another individual shall 

14 be made by the Secretary in a manner consistent 

15 with the Fair Labor Standards Act of 1938. 

16 ‘‘(d) BURDEN OF PROOF.—A taxpayer must establish 

17 entitlement to relief under this section by a preponderance 

18 of the evidence. 

19 ‘‘(e) PETITIONS FOR REVIEW OF STATUS.— 

20 ‘‘(1) IN GENERAL.—Under procedures estab21 lished by the Secretary not later than 1 year after 

22 the date of the enactment of this section, any indi23 vidual who performs services for a taxpayer may pe24 tition (either personally or through a designated repVerDate Aug 31 2005 23:17 Apr 18, 2008 Jkt 069200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5804.IH H5804

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1 resentative or attorney) for a determination of the 

2 individual’s status for employment tax purposes. 

3 ‘‘(2) ADMINISTRATIVE PROCEDURES.—The pro4 cedures established under paragraph (1) shall pro5 vide for— 

6 ‘‘(A) a determination of status not later 

7 than 90 days after the filing of the petition 

8 with respect to employment in any industry 

9 (such as the construction industry) in which 

10 employment is transient, casual, or seasonal, 

11 and 

12 ‘‘(B) an administrative appeal of any de13 termination that an individual is not an em14 ployee of the taxpayer. 

15 ‘‘(3) PROHIBITION AGAINST RETALIATION.— 

16 ‘‘(A) IN GENERAL.—No taxpayer may dis17 charge an individual, refuse to contract with an 

18 individual, or otherwise discriminate against an 

19 individual with respect to compensation, terms, 

20 conditions, or privileges of the services provided 

21 by the individual because the individual (or any 

22 designated representative or attorney on behalf 

23 of such individual) filed a petition under para24 graph (1). 


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1 ‘‘(B) RIGHTS RETAINED BY INDIVIDUAL.— 

2 Nothing in this paragraph shall be deemed to 

3 diminish the rights, privileges, or remedies of 

4 any individual under any Federal or State law, 

5 or under any collective bargaining agreement. 

6 ‘‘(f) RESULTS OF MISCLASSIFICATION DETERMINA7 TIONS.—In any case in which the Secretary determines 

8 that a taxpayer has misclassified an individual as not an 

9 employee for employment tax purposes, the Secretary shall 

10 inform the Secretary of Labor about such misclassification 

11 and notify the individual of any eligibility for the refund 

12 of self-employment taxes under chapter 2. 

13 ‘‘(g) REGULATIONS.—The Secretary shall, not later 

14 than 1 year after the date of the enactment of this section, 

15 prescribe such regulations as may be necessary and appro16 priate to carry out the purposes of this section.’’. 

17 (b) CONFORMING AMENDMENTS.— 

18 (1) Paragraph (2) of section 7436(a) of such 

19 Code is amendment by striking ‘‘section 530 of the 

20 Revenue Act of 1978’’ and inserting ‘‘section 3511’’. 

21 (2) 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. Safe harbor.’’. 

24 (c) TERMINATION OF SECTION 530 OF THE REV25 ENUE ACT OF 1978.—Section 530 of the Revenue Act of 


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1 1978 shall not apply to services rendered more than 1 year 

2 after the date of the enactment of this Act. 

3 (d) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to services rendered more than 1 

5 year after the date of the enactment of this Act. 

6 SEC. 4. ANNUAL REPORTS ON WORKER 

7 MISCLASSIFICATION. 

8 The Secretary of the Treasury shall issue an annual 

9 report on worker misclassification. Such report shall in10 clude the following: 

11 (1) Information on the number and type of en12 forcement actions against, and examinations of, em13 ployers who have misclassified workers. 

14 (2) Relief obtained as a result of such actions 

15 against, and examinations of, employers who have 

16 misclassified workers. 

17 (3) An overall estimate of the number of em18 ployers misclassifying workers, the number of work19 ers affected, and the industries involved. 

20 (4) The impact of such misclassification on the 

21 Federal tax system. 

22 (5) Information on the outcomes of the peti23 tions filed under section 3511(e) of the Internal 

24 Revenue Code of 1986. 


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1 SEC. 5. INCREASE IN INFORMATION RETURN PENALTIES. 

2 (a) FAILURE TO FILE CORRECT INFORMATION RE3 TURNS.— 

4 (1) IN GENERAL.—Section 6721(a)(1) of the 

5 Internal Revenue Code of 1986 is amended— 

6 (A) by striking ‘‘$50’’ and inserting 

7 ‘‘$250’’, and 

8 (B) by striking ‘‘$250,000’’ and inserting 

9 ‘‘$3,000,000’’. 

10 (2) REDUCTION WHERE CORRECTION IN SPECI11 FIED PERIOD.— 

12 (A) CORRECTION WITHIN 30 DAYS.—Sec13 tion 6721(b)(1) of such Code is amended— 

14 (i) by striking ‘‘$15’’ and inserting 

15 ‘‘$50’’, 

16 (ii) by striking ‘‘$50’’ and inserting 

17 ‘‘$250’’, and 

18 (iii) by striking ‘‘$75,000’’ and insert19 ing ‘‘$500,000’’. 

20 (B) FAILURES CORRECTED ON OR BEFORE

21 AUGUST 1.—Section 6721(b)(2) of such Code is 

22 amended— 

23 (i) by striking ‘‘$30’’ and inserting 

24 ‘‘$100’’, 

25 (ii) by striking ‘‘$50’’ and inserting 

26 ‘‘$250’’, and 


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1 (iii) by striking ‘‘$150,000’’ and in2 serting ‘‘$1,500,000’’. 

3 (3) LOWER LIMITATION FOR PERSONS WITH

4 GROSS RECEIPTS OF NOT MORE THAN $5,000,000.— 

5 Section 6721(d)(1) of such Code is amended— 

6 (A) in subparagraph (A)— 

7 (i) by striking ‘‘$100,000’’ and insert8 ing ‘‘$1,000,000’’, and 

9 (ii) by striking ‘‘$250,000’’ and in10 serting ‘‘$3,000,000’’, 

11 (B) in subparagraph (B)— 

12 (i) by striking ‘‘$25,000’’ and insert13 ing ‘‘$175,000’’, and 

14 (ii) by striking ‘‘$75,000’’ and insert15 ing ‘‘$500,000’’, and 

16 (C) in subparagraph (C)— 

17 (i) by striking ‘‘$50,000’’ and insert18 ing ‘‘$500,000’’, and 

19 (ii) by striking ‘‘$150,000’’ and in20 serting ‘‘$1,500,000’’. 

21 (4) PENALTY IN CASE OF INTENTIONAL DIS22 REGARD.—Section 6721(e) of such Code is amend23 ed— 

24 (A) by striking ‘‘$100’’ in paragraph (2) 

25 and inserting ‘‘$500’’, 


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1 (B) by striking ‘‘$250,000’’ in paragraph 

2 (3)(A) and inserting ‘‘$3,000,000’’. 

3 (b) FAILURE TO FURNISH CORRECT PAYEE STATE4 MENTS.— 

5 (1) IN GENERAL.—Section 6722(a) of such 

6 Code is amended— 

7 (A) by striking ‘‘$50’’ and inserting 

8 ‘‘$250’’, and 

9 (B) by striking ‘‘$100,000’’ and inserting 

10 ‘‘$1,000,000’’. 

11 (2) PENALTY IN CASE OF INTENTIONAL DIS12 REGARD.—Section 6722(c) of such Code is amend13 ed— 

14 (A) by striking ‘‘$100’’ in paragraph (1) 

15 and inserting ‘‘$500’’, and 

16 (B) by striking ‘‘$100,000’’ in paragraph 

17 (2)(A) and inserting ‘‘$1,000,000’’. 

18 (c) FAILURE TO COMPLY WITH OTHER INFORMA19 TION REPORTING REQUIREMENTS.—Section 6723 of such 

20 Code is amended— 

21 (1) by striking ‘‘$50’’ and inserting ‘‘$250’’, 

22 and 

23 (2) by striking ‘‘$100,000’’ and inserting 

24 ‘‘$1,000,000’’. 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply with respect to information returns 

3 required to be filed after December 31, 2008. 

Æ 


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