50228 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

(Docket No. 25985), and Air Transport 

Association of America (Docket No. 

26276). The FAA considers that this 

withdrawal document, along with 

earlier rulemakings on the subject of 

child restraints, responds to the 

petitions for rulemaking and we now 

consider the petitions closed. 

Conclusion 

The FAA withdraws the Advance 

Notice of Proposed Rulemaking 

published at 63 FR 43228 on August 12, 

1998, to pursue other options that will 

mitigate the risk of child injuries and 

fatalities in aircraft. Withdrawal of the 

Advance Notice of Proposed 

Rulemaking does not preclude the FAA 

from issuing another notice on the 

subject matter in the future or commit 

the agency to any future course of 

action. Although we are not continuing 

rulemaking now, we strongly 

recommend that all children who fly, 

regardless of their age, use the 

appropriate restraint based on their size 

and weight.

Issued in Washington, DC, on August 18, 

2005. 

John M. Allen, 

Acting Director, Flight Standards Service.

[FR Doc. 05–16783 Filed 8–25–05; 8:45 am] 

BILLING CODE 4910–13–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 31 

[REG–104143–05] 

RIN 1545–BE32 

Application of the Federal Insurance 

Contributions Act to Payments Made 

for Certain Services

AGENCY: Internal Revenue Service (IRS), 

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains 

proposed amendments to regulations 

relating to payments made for service 

not in the course of the employer’s trade 

or business, for domestic service in a 

private home of the employer, for 

agricultural labor, and for service 

performed as a home worker within the 

meaning of section 3121(d)(3)(C) of the 

Internal Revenue Code (Code). These 

proposed amendments would provide 

guidance concerning the application of 

the Federal Insurance Contributions Act 

(FICA) to these payments. These 

proposed amendments would affect 

employers that make these payments 

and employees that receive these 

payments. These proposed amendments 

would provide guidance to assist these 

taxpayers in complying with the law.

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by November 25, 2005.

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–104143–05), room 

5203, Internal Revenue Service, POB 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be hand 

delivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to: CC:PA:LPD:PR (REG–104143–05), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically, via the IRS Internet site 

at http://www.irs.gov/regs or via the 

Federal eRulemaking Portal at 

http://www.regulations.gov/ (IRS REG–

104143–05).

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations, 

please contact Paul Carlino of the Office 

of Division Counsel/Associate Chief 

Counsel (Tax Exempt and Government 

Entities), (202) 622–0047; concerning 

submissions of comments or to request 

a public hearing, please contact LaNita 

Van Dyke, (202) 622–7180 (not toll-free 

numbers).

SUPPLEMENTARY INFORMATION: 

Background 

This document contains proposed 

amendments to the Employment Tax 

Regulations (26 CFR part 31) under 

sections 3102, 3121(a), 3121(a)(7), 

3121(a)(8), 3121(a)(10), and 3121(i) of 

the Code. The Federal Insurance 

Contributions Act (FICA) generally 

imposes tax on each employer and 

employee. Under section 3111, FICA tax 

is imposed on the employer in an 

amount equal to a percentage of the 

wages paid by that employer. Under 

section 3101, FICA tax is also imposed 

on the employee in an amount equal to 

a percentage of the wages received by 

the employee with respect to 

employment. Section 3102 requires the 

employer to collect the tax imposed 

under section 3101 by deducting and 

withholding the amount of the tax from 

the wages as and when paid. Section 

3121(a) defines wages for FICA tax 

purposes as all remuneration for 

employment unless otherwise excepted. 

Sections 3121(a)(7) (relating to domestic 

service in a private home of the 

employer and to service not in the 

course of the employer’s trade or 

business), 3121(a)(8) (relating to 

agricultural labor) and 3121(a)(10) 

(relating to service performed as a home 

worker within the meaning of section 

3121(d)(3)(C)) provide exceptions to the 

definition of wages for FICA tax 

purposes. Section 3121(i)(1) provides 

that in the case of domestic service 

described in section 3121(a)(7)(B), any 

payment of cash remuneration for such 

service which is more or less than a 

whole-dollar amount, to the extent 

prescribed by regulations, may be 

computed to the nearest dollar. 

Section 3102(a) provides that an 

employer may deduct an amount 

equivalent to the FICA tax imposed by 

section 3101 from any payment of cash 

remuneration to which sections 

3121(a)(7)(B), 3121(a)(7)(C), 

3121(a)(8)(B) and 3121(a)(10) apply, 

even though at the time of payment the 

total amount of such remuneration paid 

to the employee by the employer in the 

calendar year is less than the dollar 

threshold amount used to determine 

whether the remuneration is wages for 

FICA tax purposes. An employer that 

chooses to withhold FICA taxes 

imposed by section 3101 prior to 

reaching the dollar threshold amount 

used to determine whether the 

remuneration is wages for FICA tax 

purposes must repay the employee the 

withheld amount if the dollar threshold 

is not met in the calendar year. If the 

withheld amount has been deposited, 

the employer must repay or reimburse 

the employee the withheld amount in 

accordance with the rules under 

§ 31.6413(a)–1 of the regulations. 

Changes to sections 3102(a) and 

3121(a)(7)(B) were made by section 

2(a)(1) of the Social Security Domestic 

Employment Reform Act of 1994, 

(SSDERA), Public Law 103–387 (108 

Stat. 4071). The SSDERA also added 

section 3121(x). Changes to section 

3102(a) were made by section 424(b) of 

the Social Security Protection Act of 

2004 (SSPA), Public Law 108–203 (118 

Stat. 493, 536). Changes to section 

3121(a)(8)(B) were made by section 

8017(b) of the Technical and 

Miscellaneous Revenue Act of 1988 (the 

1988 Act), Public Law 100–647 (102 

Stat. 3342, 3793) and section 9002(b) of 

the Omnibus Budget Reconciliation Act 

of 1987 (the 1987 Act), Public Law 100–

203 (101 Stat. 1330, 1330–287). Changes 

to sections 3102(a), 3121(a)(7)(C) and 

3121(a)(10) were made by sections 

355(a) and 356(a) of the Social Security 

Amendments of 1977 (the 1977 Act), 

Public Law 95–216 (91 Stat. 1509, 

1555). These statutory changes are not 

reflected in the existing regulations of 

§§ 31.3102–1, 31.3121(a)–2, 

31.3121(a)(7)–1, 31.3121(a)(8)–1, 

31.3121(a)(10)–1, and 31.3121(i)–1. 

These proposed regulations would 

amend these existing regulations to 

reflect the statutory changes. 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50229

Domestic Service in a Private Home of 

the Employer 

Section 3121(a)(7)(B) provides an 

exclusion from wages for FICA tax 

purposes of certain cash remuneration 

paid by an employer to an employee for 

domestic service in a private home of 

the employer. The SSDERA amended 

the dollar threshold amount and time 

period used to determine the exclusion 

under section 3121(a)(7)(B). The 

SSDERA also added section 3121(x). 

Prior to SSDERA, section 

3121(a)(7)(B) provided that cash 

remuneration paid by an employer in 

any calendar quarter to an employee for 

domestic service in a private home of 

the employer was excluded from wages 

for FICA tax purposes if the cash 

remuneration paid in such quarter by 

the employer to the employee for such 

service was less than $50. The SSDERA 

amended section 3121(a)(7)(B) to 

provide that cash remuneration paid by 

an employer in any calendar year to an 

employee for domestic service in a 

private home of the employer is 

excluded from wages for FICA tax 

purposes if the cash remuneration paid 

in such year by the employer to the 

employee for such service is less than 

the applicable dollar threshold (as 

defined in section 3121(x)) for such 

year. SSDERA is effective for cash 

remuneration paid after December 31, 

1993.

The applicable dollar threshold (as 

defined in section 3121(x)) is $1,000 for 

calendar year 1995. The applicable 

dollar threshold is adjusted annually 

under the formula described in section 

215(a)(1)(B)(ii) of the Social Security 

Act, Public Law 74–271 (49 Stat. 620). 

Under section 3121(x), if any amount as 

adjusted under section 215(a)(1)(B)(ii) is 

not a multiple of $100, such amount is 

rounded to the next lowest multiple of 

$100. For calendar year 2005, the 

applicable dollar threshold is $1,400. 

Section 3121(i)(1) provides that in the 

case of domestic service described in 

section 3121(a)(7)(B), any payment of 

cash remuneration for such service 

which is more or less than a wholedollar amount, to the extent prescribed 

by regulations, may be computed to the 

nearest dollar. The amendment to 

section 3121(a)(7)(B) made by the 

SSDERA requires changes to the 

regulations under § 31.3121(i)–1. 

Agricultural Labor 

Section 3121(a)(8)(B) provides an 

exclusion from wages for FICA tax 

purposes of certain cash remuneration 

paid by an employer in any calendar 

year to an employee for agricultural 

labor. The 1987 Act and 1988 Act 

amended section 3121(a)(8)(B) to change 

the test for determining whether cash 

remuneration paid by an employer to an 

employee for such service is wages for 

FICA tax purposes. 

Prior to the 1987 Act, section 

3121(a)(8)(B) provided that cash 

remuneration paid by an employer in 

any calendar year to an employee for 

agricultural labor was excluded from 

wages for FICA tax purposes unless the 

cash remuneration was $150 or more, or 

the employee performed agricultural 

labor for the employer on 20 or more 

days during such year for cash 

remuneration computed on a time basis. 

The 1987 Act amended section 

3121(a)(8)(B) to provide that cash 

remuneration paid by an employer in 

any calendar year to an employee for 

agricultural labor is excluded from 

wages for FICA tax purposes unless the 

cash remuneration paid in such year by 

the employer to the employee for such 

labor is $150 or more, or the employer’s 

expenditures for agricultural labor in 

such year equals or exceeds $2,500. 

The 1988 Act added language to 

3121(a)(8)(B) to provide that the test of 

whether the employer’s expenditures for 

agricultural labor in any calendar year 

equal or exceed $2,500 has no effect in 

determining whether remuneration paid 

to an employee in such year constitutes 

wages under this section if such 

employee (1) is employed in agriculture 

as a hand-harvest laborer and is paid on 

a piece rate basis in an operation which 

has been, and is customarily and 

generally recognized as having been, 

paid on a piece rate basis in the region 

of employment, (2) commutes daily 

from his permanent residence to the 

farm on which he is employed, and (3) 

has been employed in agriculture less 

than 13 weeks during the preceding 

calendar year. Nonetheless, amounts 

paid to these seasonal workers count 

towards the $2,500 test when applying 

section 3121(a)(8)(B) to other 

agricultural workers. The 1987 and 1988 

Acts are effective for cash remuneration 

paid after December 31, 1987. 

Home Workers 

Section 3121(a)(10) provides an 

exclusion from wages for FICA tax 

purposes of certain cash remuneration 

paid by an employer to an employee for 

service described in section 

3121(d)(3)(C) (relating to home 

workers). The 1977 Act amended the 

dollar threshold amount and time 

period used to determine the exclusion 

under section 3121(a)(10). 

Prior to the 1977 Act, section 

3121(a)(10) provided that cash 

remuneration paid by an employer in 

any calendar quarter to an employee for 

service described in 3121(d)(3)(C) 

(relating to home workers) was excluded 

from wages for FICA tax purposes if the 

cash remuneration paid in such quarter 

by the employer to the employee for 

such service was less than $50. The 

1977 Act amended section 3121(a)(10) 

to provide that remuneration paid by an 

employer in any calendar year to an 

employee for service described in 

section 3121(d)(3)(C) (relating to home 

workers) is excluded from wages for 

FICA tax purposes if the cash 

remuneration paid in such year by the 

employer to the employee for such 

service is less than $100. The 1977 Act 

is effective for cash remuneration paid 

after December 31, 1977. 

Service Not in the Course of the 

Employer’s Trade or Business 

Section 3121(a)(7)(C) provides an 

exclusion from wages for FICA tax 

purposes of certain cash remuneration 

paid by an employer to an employee for 

service not in the course of the 

employer’s trade or business. The 1977 

Act amended the dollar threshold 

amount and time period used to 

determine the exclusion under section 

3121(a)(7)(C). 

Prior to the 1977 Act, section 

3121(a)(7)(C) provided that cash 

remuneration paid by an employer in 

any calendar quarter to an employee for 

service not in the course of the 

employer’s trade or business was 

excluded from wages for FICA tax 

purposes if the cash remuneration paid 

in such quarter by the employer to the 

employee for such service was less than 

$50. The 1977 Act amended section 

3121(a)(7)(C) to provide that cash 

remuneration paid by an employer in 

any calendar year to an employee for 

service not in the course of the 

employer’s trade or business is excluded 

from wages for FICA tax purposes if the 

cash remuneration paid in such year by 

the employer to the employee for such 

service is less than $100. The 1977 Act 

is effective for cash remuneration paid 

after December 31, 1977.

Explanation of Provisions 

These proposed regulations would 

amend the existing regulations to reflect 

current law. 

The proposed regulations relating to 

domestic service in a private home of 

the employer would amend existing 

regulations §§ 31.3102–1, 31.3121(a)–

2(c), and 31.3121(a)(7)–1 to reflect 

changes implemented by the SSDERA 

and to be applicable as of that date. For 

cash remuneration paid prior to January 

1, 1994 (the effective date of the 

SSDERA), taxpayers should rely on the 

50230 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

regulations applicable at the time such 

cash remuneration was paid. 

The proposed regulations relating to 

agricultural labor would amend existing 

regulations §§ 31.3102–1, 31.3121(a)–

2(c) and 31.3121(a)(8)–1 to reflect 

changes implemented by the SSPA, the 

1987 Act and the 1988 Act and to be 

applicable as of that date. For cash 

remuneration paid prior to January 1, 

1988 (the effective date of the 1987 Act 

and the 1988 Act), taxpayers should rely 

on the regulations applicable at the time 

such cash remuneration was paid. 

The proposed regulations relating to 

home workers and/or to service not in 

the course of the employer’s trade or 

business would amend existing 

regulations §§ 31.3102–1, 31.3121(a)–

2(c), 31.3121(a)(7)–1 and 

31.3121(a)(10)–1 to reflect changes 

implemented by the 1977 Act and to be 

applicable as of that date. For cash 

remuneration paid prior to January 1, 

1978 (the effective date of the 1977 Act), 

taxpayers should rely on the regulations 

applicable at the time such cash 

remuneration was paid. 

The proposed regulations relating to 

computation to the nearest dollar of 

cash remuneration for domestic service 

would amend the existing regulations 

under § 31.3121(i)–1 to reflect changes 

implemented by the SSDERA and to be 

applicable as of that date. For cash 

remuneration paid prior to January 1, 

1994 (the effective date of the SSDERA), 

taxpayers should rely on the regulations 

applicable at the time such cash 

remuneration was paid. 

Proposed Effective Date 

These proposed regulations would be 

applicable on the date of publication of 

the Treasury Decision adopting these 

regulations as final regulations in the 

Federal Register. The regulations 

relating to domestic service in a private 

home of the employer would apply to 

cash remuneration paid on or after 

January 1, 1994. The regulations relating 

to agricultural labor would apply to 

cash remuneration paid on or after 

January 1, 1988. The regulations relating 

to home workers and/or service not in 

the course of the employer’s trade or 

business would apply to cash 

remuneration paid on or after January 1, 

1978. The regulations relating to 

computation to the nearest dollar of 

cash remuneration for domestic service 

would apply to cash remuneration paid 

on or after January 1, 1994. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) and the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) do not apply to these 

regulations, and therefore, a Regulatory 

Flexibility Analysis is not required. 

Pursuant to section 7805(f) of the Code, 

this notice of proposed rulemaking will 

be submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Comments and Requests for Public 

Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written (a signed original and eight (8) 

copies) or electronic comments that are 

submitted timely to the IRS. The IRS 

and Treasury Department specifically 

request comments on the clarity of 

proposed regulations and how they can 

be made easier to understand. All 

comments will be available for public 

inspection and copying. A public 

hearing may be scheduled if requested 

by any person who timely submits 

comments. If a public hearing is 

scheduled, notice of the date, time and 

place for the hearing will be published 

in the Federal Register. 

Drafting Information 

The principal authors of these 

proposed regulations are Paul J. Carlino 

and Michael A. Swim, Office of the 

Division Counsel/Associate Chief 

Counsel (Tax Exempt and Government 

Entities). However, other personnel 

from the IRS and Treasury Department 

participated in their development.

List of Subjects in 26 CFR Part 31 

Employment taxes, Income taxes, 

Penalties, Pensions, Railroad retirement, 

Reporting and recordkeeping 

requirements, Social security, 

Unemployment compensation.

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 31 is 

proposed to be amended as follows:

PART 31—EMPLOYMENT TAXES AND 

COLLECTION OF INCOME TAX AT 

SOURCE 

Paragraph 1. The authority citation 

for part 31 continues to read, in part, as 

follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 31.3102–1 is amended 

by: 

1. Revising paragraph (b). 

2. Redesignating paragraph (c) as 

paragraph (d).

3. Adding new paragraph (c). 

4. Adding paragraph (e). 

The additions and revision read as 

follows:

§ 31.3102–1 Collection of, and liability for, 

employee tax; in general.

* * * * *

(b) The employer is permitted, but not 

required, to deduct amounts equivalent 

to employee tax from payments to an 

employee of cash remuneration to 

which the sections referred to in this 

paragraph (b) are applicable prior to the 

time that the sum of such payments 

equals—

(1) $100 in the calendar year, for 

service not in the course of the 

employer’s trade or business, to which 

§ 31.3121(a)(7)–1 is applicable; 

(2) The applicable dollar threshold (as 

defined in section 3121(x)) in the 

calendar year, for domestic service in a 

private home of the employer, to which 

§ 31.3121(a)(7)–1 is applicable; 

(3) $150 in the calendar year, for 

agricultural labor, to which 

§ 31.3121(a)(8)–1(c)(1)(i) is applicable; 

or 

(4) $100 in the calendar year, for 

service performed as a home worker, to 

which § 31.3121(a)(10)–1 is applicable. 

(c) At such time as the sum of the cash 

payments in the calendar year for a type 

of service referred to in paragraph (b)(1), 

(b)(2), (b)(3) or (b)(4) of this section 

equals or exceeds the amount specified, 

the employer is required to collect from 

the employee any amount of employee 

tax not previously deducted. If an 

employer pays cash remuneration to an 

employee for two or more of the types 

of service referred to in paragraph (b)(1), 

(b)(2), (b)(3) or (b)(4) of this section, the 

provisions of paragraph (b) of this 

section and this paragraph (c) are to be 

applied separately to the amount of 

remuneration attributable to each type 

of service. For provisions relating to the 

repayment to an employee, or other 

disposition, of amounts deducted from 

an employee’s remuneration in excess of 

the correct amount of employee tax, see 

§ 31.6413(a)–1.

* * * * *

(e)(1) The provisions of paragraphs (a) 

and (d) of this section apply to any 

payment made on or after January 1, 

1955. 

(2) The provisions of paragraphs (b) 

and (c) of this section that apply to any 

payment made for service not in the 

course of the employer’s trade or 

business or for service performed as a 

home worker within the meaning of 

section 3121(d)(3)(C) apply to any such 

payment made on or after January 1, 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50231

1978. The provisions of paragraphs (b) 

and (c) of this section that apply to any 

payment made for domestic service in a 

private home of the employer apply to 

any such payment made on or after 

January 1, 1994. The provisions of 

paragraphs (b) and (c) of this section 

that apply to any payment made for 

agricultural labor apply to any such 

payment made on or after January 1, 

1988. For rules applicable to any 

payment for these services made prior to 

the dates set forth in this paragraph 

(e)(2), see § 31.3102–1 in effect at such 

time (see 26 CFR part 31 revised as of 

April 1, 2005). 

Par. 3. Section 31.3121(a)–2 is 

amended by: 

1. Revising paragraph (c)(1). 

2. Redesignating paragraphs (c)(2) and 

(c)(3) as paragraphs (c)(3) and (c)(4), 

respectively. 

3. Adding new paragraph (c)(2). 

4. Revising newly designated 

paragraph (c)(3).

5. Adding paragraph (d). 

The additions and revisions read as 

follows:

§ 31.3121(a)–2 Wages; when paid and 

received.

* * * * *

(c)(1) The first $100 of cash 

remuneration paid, either actually or 

constructively, by an employer in any 

calendar year to an employee for—

(i) Service not in the course of the 

employer’s trade or business, to which 

§ 31.3121(a)(7)–1 is applicable, shall be 

deemed to be paid by the employer to 

the employee at the first moment of time 

in such calendar year that the sum of 

such cash payments made within such 

year is at least $100; or 

(ii) Service performed as a home 

worker within the meaning of section 

3121(d)(3)(C), to which 

§ 31.3121(a)(10)–1 is applicable, shall be 

deemed to be paid by the employer to 

the employee at the first moment of time 

in such calendar year that the sum of 

such cash payments made within such 

year is at least $100. 

(2) Cash remuneration paid, either 

actually or constructively, by an 

employer in any calendar year to an 

employee for domestic service in a 

private home of the employer to which 

§ 31.3121(a)(7)–1 is applicable, and 

before the sum of the payments of such 

cash remuneration equals or exceeds the 

applicable dollar threshold (as defined 

in section 3121(x)) for such year, shall 

be deemed to be paid by the employer 

to the employee at the first moment of 

time in such calendar year that the sum 

of such cash payments made within 

such year equals or exceeds the 

applicable dollar threshold (as defined 

in section 3121(x)) for such year. 

(3) Cash remuneration paid, either 

actually or constructively, by an 

employer in any calendar year to an 

employee for agricultural labor to which 

§ 31.3121(a)(8)–1 is applicable, and 

before either of the events described in 

paragraphs (c)(3)(i) and (c)(3)(ii) of this 

section has occurred, shall be deemed to 

be paid by the employer to the 

employee at the first moment of time in 

such calendar year that—

(i) The sum of the payments of such 

remuneration is $150 or more; or 

(ii) The employer’s expenditures for 

agricultural labor in such calendar year 

equals or exceeds $2,500, except that 

this paragraph (c)(3)(ii) shall not apply 

in determining when such remuneration 

is deemed to be paid under this 

paragraph if such employee—

(A) Is employed as a hand-harvest 

laborer and is paid on a piece rate basis 

in an operation which has been, and is 

customarily and generally recognized as 

having been, paid on a piece rate basis 

in the region of employment; 

(B) Commutes daily from his 

permanent residence to the farm on 

which he is so employed; and 

(C) Has been employed in agriculture 

less than 13 weeks during the preceding 

calendar year.

* * * * *

(d)(1) The provisions of paragraphs (a) 

and (b) of this section apply to any 

payment of wages made on or after 

January 1, 1955. 

(2) The provisions of paragraph (c) of 

this section that apply to any payment 

of wages made for service not in the 

course of the employer’s trade or 

business or for service performed as a 

home worker within the meaning of 

section 3121(d)(3)(C) apply to any such 

payment made on or after January 1, 

1978. The provisions of paragraph (c) of 

this section that apply to any payment 

of wages made for domestic service in 

a private home of the employer apply to 

any such payment made on or after 

January 1, 1994. The provisions of 

paragraph (c) of this section that apply 

to any payment of wages made for 

agricultural labor apply to any such 

payment made on or after January 1, 

1988. For rules applicable to any 

payment of wages for these services 

made prior to the dates set forth in this 

paragraph (d)(2), see § 31.3102–1 in 

effect at such time (see 26 CFR part 31 

revised as of April 1, 2005). 

Par. 4. Section 31.3121(a)(7)–1 is 

amended by: 

1. Revising paragraphs (c)(1) and 

(c)(2). 

2. Adding paragraphs (c)(3), (d) and 

(e). 

The additions and revisions read as 

follows:

§ 31.3121(a)(7)–1 Payments for services 

not in the course of employer’s trade or 

business or for domestic service.

* * * * *

(c) Cash payments. (1) The term 

wages does not include cash 

remuneration paid by an employer in 

any calendar year to an employee for—

(i) Domestic service in a private home 

of the employer, unless the cash 

remuneration paid in such year by the 

employer to the employee for such 

service equals or exceeds the applicable 

dollar threshold (as defined in section 

3121(x)) for such year; or 

(ii) Service not in the course of the 

employer’s trade or business, unless the 

cash remuneration paid in such year by 

the employer to the employee for such 

service equals or exceeds $100. 

(2) The tests relating to cash 

remuneration are based on the 

remuneration paid in a calendar year 

rather than on the remuneration earned 

during a calendar year. The following 

example illustrates this provision:

Example. On March 31, 2004, employer X 

pays employee A cash remuneration of $100 

for service not in the course of X’s trade or 

business. Such remuneration constitutes 

wages subject to the taxes even though $10 

thereof represents payment for such service 

performed by A for X in December 2003.

(3) In determining whether wages 

have been paid either for domestic 

service in a private home of the 

employer or for service not in the course 

of the employer’s trade or business, only 

cash remuneration for such service shall 

be taken into account. Cash 

remuneration includes checks and other 

monetary media of exchange. 

Remuneration paid in any other 

medium, such as lodging, food, 

clothing, car tokens, transportation 

passes or tickets, or other goods or 

commodities, is disregarded in 

determining whether the cashremuneration test is met. If an employee 

receives cash remuneration from an 

employer in a calendar year for both 

types of services the pertinent cashremuneration test is to be applied 

separately to each type of service. If an 

employee receives cash remuneration 

from more than one employer in a 

calendar year for domestic service in a 

private home of the employer or for 

service not in the course of the 

employer’s trade or business, the 

pertinent cash-remuneration test is to be 

applied separately to the remuneration 

received from each employer. 

(d) Cross references. (1) For 

provisions relating to deduction of 

employee tax or amounts equivalent to 

50232 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

the tax from cash payments for the 

services described in this section, see 

§ 31.3102–1; 

(2) For provisions relating to time of 

payment of wages for such services, see 

§ 31.3121(a)–2; 

(3) For provisions relating to 

computations to the nearest dollar of 

any payment of cash remuneration for 

domestic service in a private home of 

the employer, see § 31.3121(i)–1. 

(e) Effective dates. (1) The provisions 

of this section apply to any cash 

payment for service not in the course of 

the employer’s trade or business made 

on or after January 1, 1978 and for 

domestic service in a private home of 

the employer made on or after January 

1, 1994. 

(2) For rules applicable to any cash 

payment made prior to the dates set 

forth in paragraph (e)(1), see 

§ 31.3121(a)(7)–1 in effect at such time 

(see 26 CFR part 31 revised as of April 

1, 2005). 

Par. 5. Section 31.3121(a)(8)–1 is 

amended by: 

1. Revising paragraphs (c), (d), and (e). 

2. Adding paragraph (h). 

The addition and revisions read as 

follows:

§ 31.3121(a)(8)–1 Payments for agricultural 

labor.

* * * * *

(c) Cash payments. (1) The term 

wages does not include cash 

remuneration paid by an employer in 

any calendar year to an employee for 

agricultural labor unless—

(i) The cash remuneration paid in 

such year by the employer to the 

employee for such labor is $150 or 

more; or 

(ii) The employer’s expenditures for 

agricultural labor in such year equal or 

exceed $2,500, except that this 

paragraph (c)(1)(ii) shall not apply in 

determining whether remuneration paid 

to an employee constitutes wages for 

agricultural labor if such employee—

(A) Is employed as a hand-harvest 

laborer and is paid on a piece rate basis 

in an operation which has been, and is 

customarily and generally recognized as 

having been, paid on a piece rate basis 

in the region of employment; 

(B) Commutes daily from his 

permanent residence to the farm on 

which he is so employed; and 

(C) Has been employed in agriculture 

less than 13 weeks during the preceding 

calendar year. 

(2) The application of the provisions 

of paragraph (c)(1) of this section may 

be illustrated by the following example:

Example. Employer X pays A $140 in cash 

for agricultural labor in calendar year 2004. 

X makes no other payments to A during the 

year and makes no other payment for 

agricultural labor to any other employee. 

Employee A is not employed as a handharvest laborer. Neither the $150-cashremuneration test nor the $2,500-employer’sexpenditures-for-agricultural-labor test is 

met. Accordingly, the remuneration paid by 

X to A is not subject to the taxes. If in 2004 

X had paid A $140 in cash for agricultural 

labor and had made expenditures of $2,360 

or more to other employees for agricultural 

labor, the $140 paid by X to A would have 

been subject to tax because the $2,500-

employer’s-expenditures-for-agriculturallabor test would have been met. Or, if X had 

paid A $150 in cash in 2004 and made no 

other payments to any other employee for 

agricultural labor, the $150 paid by X to A 

would have been subject to tax because the 

$150-cash-remuneration test would have 

been met.

(d) Application of cash-remuneration 

test. (1) If an employee receives cash 

remuneration from an employer both for 

services which constitute agricultural 

labor and for services which do not 

constitute agricultural labor, only the 

amount of such remuneration which is 

attributable to agricultural labor shall be 

included in determining whether cash 

remuneration of $150 or more has been 

paid in the calendar year by the 

employer to the employee for 

agricultural labor. The following 

example illustrates this paragraph (d)(1):

Example. Employer X operates a store and 

also is engaged in farming operations. 

Employee A, who regularly performs services 

for X in connection with the operation of the 

store, works on X’s farm when additional 

help is required for the farm activities. In the 

calendar year 2004, X pays A $140 in cash 

for services performed in agricultural labor, 

and $4,000 for services performed in 

connection with the operation of the store. X 

has no additional expenditures for 

agricultural labor in 2004. Since the cash 

remuneration paid by X to A in the calendar 

year 2004 for agricultural labor is less than 

$150, the $150-cash-remuneration test is not 

met. The $140 paid by X to A in 2004 for 

agricultural labor does not constitute wages 

and is not subject to the taxes.

(2) The test relating to cash 

remuneration of $150 or more is based 

on the cash remuneration paid in a 

calendar year rather than on the 

remuneration earned during a calendar 

year. It is immaterial if such cash 

remuneration is paid in a calendar year 

other than the year in which the 

agricultural labor is performed. The 

following example illustrates this 

paragraph (d)(2):

Example. Employer X pays cash 

remuneration of $150 in the calendar year 

2004 to employee A for agricultural labor. 

Such remuneration constitutes wages even 

though $10 of such amount represents 

payment for agricultural labor performed by 

A for X in December 2003.

(3) In determining whether $150 or 

more has been paid to an employee for 

agricultural labor, only cash 

remuneration for such labor shall be 

taken into account. If an employee 

receives cash remuneration in any one 

calendar year from more than one 

employer for agricultural labor, the 

cash-remuneration test is to be applied 

with respect to the remuneration 

received by the employee from each 

employer in such calendar year for such 

labor. 

(e) Application of employer’sexpenditures-for-agricultural-labor test.

(1) If an employer has expenditures in 

a calendar year for agricultural labor 

and for non-agricultural labor, only the 

amount of such expenditures for 

agricultural labor shall be included in 

determining whether the employer’s 

expenditures for agricultural labor in 

such year equal or exceed $2,500. The 

following example illustrates this 

paragraph (e)(1):

Example. Employer X operates a store and 

also is engaged in farming operations. 

Employee A, who regularly performs services 

for X in connection with the operation of the 

store, works on X’s farm when additional 

help is required for the farm activities. In 

calendar year 2004, X pays A $140 in cash 

for services performed in agricultural labor, 

and $4,000 for services performed in 

connection with the operation of the store. X 

has no additional expenditures for 

agricultural labor in 2004. Since X’s 

expenditures for agricultural labor in 2004 

are less than $2,500, the employer’sexpenditures-for-agricultural-labor test is not 

met. The $140 paid by X to A in 2004 for 

agricultural labor does not constitute wages 

and is not subject to the taxes.

(2) The test relating to an employer’s 

expenditures of $2,500 or more for 

agricultural labor is based on the 

expenditures paid by the employer in a 

calendar year rather than on the 

expenses incurred by the employer 

during a calendar year. It is immaterial 

if the expenditures are paid in a 

calendar year other than the year in 

which the agricultural labor is 

performed. The following example 

illustrates this paragraph (e)(2):

Example. Employer X employs A to 

construct fences on a farm owned by X. The 

work constitutes agricultural labor and is 

performed over the course of November and 

December 2003. A is not employed by X at 

any other time, however X does have other 

employees to whom X pays remuneration of 

$2,000 for agricultural labor in 2003. X pays 

A $140 in cash in November 2003 and $140 

in cash in January 2004, in full payment for 

the work. The $140 payment to A made in 

November is not wages for calendar year 

2003 because the $150-cash-remuneration 

test is not met and X’s total expenditures for 

agricultural labor for such year are not equal 

to or in excess of $2,500. The $140 payment 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50233

to A made in January is not wages for 2004 

because the $150 cash-remuneration test is 

not met. However, if X pays additional 

remuneration to employees for agricultural 

labor in 2004 that equals or exceeds $2,360, 

the employer’s-expenditures-for-agriculturallabor test will be met and the $140 paid by 

X to A in 2004 will be considered wages. It 

is immaterial that the work was performed in 

2003.

* * * * *

(h) Effective dates. The provisions of 

this section apply to any payment for 

agricultural labor made on or after 

January 1, 1988. For rules applicable to 

any payment for agricultural labor made 

prior to January 1, 1988, see 

§ 31.3121(a)(8)–1 in effect at such time 

(see 26 CFR part 31 revised as of April 

1, 2005). 

Par. 6. Section 31.3121(a)(10)–1 is 

revised to read as follows:

§ 31.3121(a)(10)–1 Payments to certain 

home workers. 

(a) The term wages does not include 

remuneration paid by an employer in 

any calendar year to an employee for 

service performed as a home worker 

who is an employee by reason of the 

provisions of section 3121(d)(3)(C) (see 

§ 31.3121(d)–1(d)), unless the cash 

remuneration paid in such calendar year 

by the employer to the employee for 

such services is $100 or more. The test 

relating to cash remuneration of $100 or 

more is based on remuneration paid in 

a calendar year rather than on 

remuneration earned during a calendar 

year. If cash remuneration of $100 or 

more is paid in a particular calendar 

year, it is immaterial whether such 

remuneration is in payment for services 

performed during the year of payment 

or during any other year. 

(b) The application of paragraph (a) of 

this section may be illustrated by the 

following example:

Example. A, a home worker, performs 

services for X, a manufacturer, in 2003 and 

2004. In the performance of the home work 

A is an employee by reason of section 

3121(d)(3)(C). In March 2004, A returns to X 

articles made by A at home from materials 

received by A from X in 2003. X pays A cash 

remuneration of $100 for such work when 

the finished articles are delivered. The $100 

includes $10 which represents remuneration 

for home work performed by A in 2003. The 

entire $100 is subject to the taxes. Any 

additional cash remuneration paid by X to A 

in 2004 for such services is also subject to the 

taxes.

(c) In the event an employee receives 

remuneration in any one calendar year 

from more than one employer for 

services performed as a home worker of 

the character described in paragraph (a) 

of this section, the regulations in this 

section are to be applied with respect to 

the remuneration received by the 

employee from each employer in such 

calendar year for such services. This 

exclusion from wages has no 

application to remuneration paid for 

services performed as a home worker 

who is an employee under section 

3121(d)(2) (see § 31.3121(d)–1(c)) 

relating to common law employees. 

(d) Cash remuneration includes 

checks and other monetary media of 

exchange. Remuneration paid in any 

other medium, such as clothing, car 

tokens, transportation passes or tickets, 

or other goods or commodities, is 

disregarded in determining whether the 

$100 cash-remuneration test is met. If 

the cash remuneration paid in any 

calendar year by an employer to an 

employee for services performed as a 

home worker of the character described 

in paragraph (a) of this section is $100 

or more, then no remuneration, whether 

in cash or in any medium other than 

cash, paid by the employer to the 

employee in such calendar year for such 

services is excluded from wages under 

this exception. 

(e)(1) For provisions relating to 

deductions of employee tax or amounts 

equivalent to the tax from cash 

payments for services performed as a 

home worker within the meaning of 

section 3121(d)(3)(C), see § 31.3102–1. 

(2) For provisions relating to the time 

of payment of wages for services 

performed as a home worker within the 

meaning of section 3121(d)(3)(C), see 

§ 31.3121(a)–2. 

(3) For provisions relating to records 

to be kept with respect to payment of 

wages for services performed as a home 

worker within the meaning of section 

3121(d)(3)(C), see § 31.6001–2. 

(f) The provisions of this section 

apply to any payment for services 

performed as a home worker within the 

meaning of section 3121(d)(3)(C) made 

on or after January 1, 1978. For rules 

applicable to any payment for services 

performed as a home worker within the 

meaning of section 3121(d)(3)(C) made 

prior to January 1, 1978, see 

§ 31.3121(a)(10)–1 in effect at such time 

(see 26 CFR part 31 revised as of April 

1, 2005). 

Par. 7. Section 31.3121(i)–1 is 

amended as follows: 

1. Redesignating the undesignated 

text as paragraph (a). 

2. Remove the language ‘‘quarter’’

each place it appears and add ‘‘year’’ in 

its place in newly designated paragraph 

(a). 

3. Adding new paragraph (b). 

The addition reads as follows:

§ 31.3121(i)–1 Computation to nearest 

dollar of cash remuneration for domestic 

service.

* * * * *

(b) The provisions of this section 

apply to any cash payment for domestic 

service in a private home of the 

employer made on or after January 1, 

1994. For rules applicable to any cash 

payment for domestic service in a 

private home of the employer made 

prior to January 1, 1994, see 

§ 31.3121(i)–1 in effect at such time (see 

26 CFR part 31 revised as of April 1, 

2005).

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement.

[FR Doc. 05–16944 Filed 8–25–05; 8:45 am] 

BILLING CODE 4830–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 54

[REG–138647–04] 

RIN 1545–BE30

Employer Comparable Contributions to 

Health Savings Accounts Under 

Section 4980G

AGENCY: Internal Revenue Service (IRS), 

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains 

proposed regulations providing 

guidance on employer comparable 

contributions to Health Savings 

Accounts (HSAs) under section 4980G. 

In general, these proposed regulations 

would affect employers that contribute 

to employees’ HSAs.

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by November 25, 2005.

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–138647–04), room 

5203, Internal Revenue Service, POB 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be hand 

delivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–138647–04), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC. Alternatively, 

taxpayers may submit comments 

electronically via the IRS Internet site at 

www.irs.gov/regs or via the Federal 

eRulemaking Portal at 

www.regulations.gov (IRS–REG–

138647–04).

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations,