II 

110TH CONGRESS 

1ST SESSION S. 1849 

To amend the Internal Revenue Code of 1986 to clarify that wages paid 

to unauthorized aliens may not be deducted from gross income, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 23, 2007 

Mr. SMITH 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 

that wages paid to unauthorized aliens may not be deducted from gross income, 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 ‘‘Lawful Worker Tax 

5 Deduction Act’’. 


cprice-sewell on PRODPC60 with BILLS
2 

•S 1849 IS

1 SEC. 2. CLARIFICATION THAT WAGES PAID TO UNAUTHOR2 IZED ALIENS MAY NOT BE DEDUCTED FROM 

3 GROSS INCOME. 

4 (a) IN GENERAL.—Subsection (c) of section 162 of 

5 the Internal Revenue Code of 1986 (relating to illegal 

6 bribes, kickbacks, and other payments) is amended by 

7 adding at the end the following new paragraph: 

8 ‘‘(4) WAGES PAID TO OR ON BEHALF OF UNAU9 THORIZED ALIENS.— 

10 ‘‘(A) IN GENERAL.—No deduction shall be 

11 allowed under subsection (a) for any wage paid 

12 to or on behalf of an unauthorized alien, as de13 fined under section 274A(h)(3) of the Immigra14 tion and Nationality Act (8 U.S.C. 

15 1324a(h)(3)). 

16 ‘‘(B) WAGES.—For the purposes of this 

17 paragraph, the term ‘wages’ means all remu18 neration for employment, including the cash 

19 value of all remuneration (including benefits) 

20 paid in any medium other than cash. 

21 ‘‘(C) SAFE HARBOR.—If a person or other 

22 entity is participating in the basic pilot program 

23 described in section 403 of the Illegal Immigra24 tion Reform and Immigrant Responsibility Act 

25 of 1996 (8 U.S.C. 1324a note) and obtains con26 firmation of identity and employment eligibility 


cprice-sewell on PRODPC60 with BILLS
3 

•S 1849 IS

1 in compliance with the terms and conditions of 

2 the program with respect to the hiring (or re3 cruitment or referral) of an employee, subpara4 graph (A) shall not apply with respect to wages 

5 paid to such employee.’’. 

6 (b) 6-YEAR LIMITATION ON ASSESSMENT AND COL7 LECTION.—Subsection (c) of section 6501 of such Code 

8 (relating to exceptions) is amended by adding at the end 

9 the following new paragraph: 

10 ‘‘(11) DEDUCTION CLAIMED FOR WAGES PAID

11 TO UNAUTHORIZED ALIENS.—In the case of a return 

12 of tax on which a deduction is shown in violation of 

13 section 162(c)(4), any tax under chapter 1 may be 

14 assessed, or a proceeding in court for the collection 

15 of such tax may be begun without assessment, at 

16 any time within 6 years after the return was filed.’’. 

17 (c) USE OF DOCUMENTATION FOR ENFORCEMENT

18 PURPOSES.—Section 274A of the Illegal Immigration Re19 form and Immigrant Responsibility Act of 1996 is amend20 ed— 

21 (1) in subparagraph (b)(5), by inserting ‘‘, sec22 tion 162(c)(4) of the Internal Revenue Code of 

23 1986,’’ after ‘‘enforcement of this chapter’’; 


cprice-sewell on PRODPC60 with BILLS
4 

•S 1849 IS

1 (2) in subparagraph (d)(2)(F), by inserting ‘‘, 

2 section 162(c)(4) of the Internal Revenue Code of 

3 1986,’’ after ‘‘enforcement of this chapter’’; and 

4 (3) in subparagraph (d)(2)(G), by inserting 

5 ‘‘section 162(c)(4) of the Internal Revenue Code of 

6 1986 or’’ after ‘‘or enforcement of’’. 

7 (d) AVAILABILITY OF INFORMATION.—The Commis8 sioner of Social Security shall make available to the Com9 missioner of Internal Revenue any information related to 

10 the investigation and enforcement of section 162(c)(4) of 

11 the Internal Revenue Code of 1986, including any no12 match letter and any information in the suspense earnings 

13 file. 

14 (e) EFFECTIVE DATE.— 

15 (1) Except as provided in paragraph (2), this 

16 Act and the amendments made by this Act shall 

17 take effect on the date of the enactment of this Act. 

18 (2) The amendments made by subsections (a) 

19 and (b) shall apply to taxable years beginning after 

20 December 31, 2007. 

Æ 


cprice-sewell on PRODPC60 with BILLS