II 

110TH CONGRESS 

1ST SESSION S. 1773 

To amend the Internal Revenue Code of 1986 to regulate payroll tax deposit 

agents. 

IN THE SENATE OF THE UNITED STATES 

JULY 12, 2007 

Ms. SNOWE 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 regulate 

payroll tax deposit agents. 

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 ‘‘Small Business Payroll 

5 Protection Act of 2007’’. 

6 SEC. 2. REGULATION OF PAYROLL TAX DEPOSIT AGENTS. 

7 (a) IN GENERAL.—Chapter 77 of the Internal Rev8 enue Code of 1986 (relating to miscellaneous provisions) 

9 is amended by adding at the end the following new section: 

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1 ‘‘SEC. 7529. PAYROLL TAX DEPOSIT AGENTS. 

2 ‘‘(a) REGISTRATION.— 

3 ‘‘(1) IN GENERAL.—The Secretary shall estab4 lish a system to require the initial registration and 

5 the annual renewal of the registration of persons 

6 seeking to act as payroll tax deposit agents author7 ized to make Federal employment tax deposits on 

8 behalf of employer taxpayers. Such system shall 

9 also— 

10 ‘‘(A) establish a registration and renewal 

11 fee for each payroll tax deposit agent in an 

12 amount not to exceed $100, 

13 ‘‘(B) provide the payroll tax deposit agent 

14 the option of either submitting a bond as speci15 fied in subsection (b) or submitting to a quar16 terly certification as specified in subsection (c), 

17 ‘‘(C) require such disclosures as are speci18 fied in subsection (d), and 

19 ‘‘(D) provide penalties for unregistered 

20 persons acting as payroll tax deposit agents 

21 with respect to Federal tax deposits and for 

22 payroll tax deposit agents who fail to furnish 

23 such disclosures as are specified in subsection 

24 (d), in an amount not to exceed $10,000 for 

25 each 90 days of noncompliance. 

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1 ‘‘(2) DEFINITION OF PAYROLL TAX DEPOSIT

2 AGENT.—For purposes of this section, the term 

3 ‘payroll tax deposit agent’ means any person which 

4 provides payroll processing or tax filing and deposit 

5 services to 1 or more employers (other than an em6 ployer acting on its own behalf) if such person has 

7 the contractual authority to access such employer’s 

8 funds for the purpose of making employment tax de9 posits. Such term shall not include any person which 

10 only transfers such funds to the appropriate govern11 ment authority (regardless if such person has the 

12 authority to determine the amount of such transfer) 

13 and does not otherwise have the authority to access 

14 such funds. 

15 ‘‘(3) EMPLOYMENT TAX.—For purposes of this 

16 section, the term ‘employment tax’ includes unem17 ployment insurance contributions. 

18 ‘‘(b) BONDING.— 

19 ‘‘(1) IN GENERAL.—If a payroll tax deposit 

20 agent elects to submit a bond under subsection 

21 (a)(1)(B), the amount of such bond shall be not less 

22 than $50,000 nor more than $500,000, and shall be 

23 determined with respect to each payroll tax deposit 

24 agent under regulations prescribed by the Secretary. 

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1 ‘‘(2) SURETY.—Any bond or security furnished 

2 pursuant to this section shall be in such form and 

3 with such surety or sureties as may be prescribed by 

4 regulations issued pursuant to section 7101. 

5 ‘‘(3) EVIDENCE OF BOND.—Evidence of such 

6 bond shall be filed with the Secretary with the initial 

7 registration and each annual renewal of the registra8 tion of persons licensed to act as payroll tax deposit 

9 agents. 

10 ‘‘(c) QUARTERLY CERTIFICATIONS.—If a payroll tax 

11 deposit agent elects to submit to a quarterly certification 

12 under subsection (a)(1)(B), such certification shall be per13 formed by an independent third party who is qualified to 

14 perform such certifications under targeted criteria estab15 lished by the Secretary, at the direction of the Secretary, 

16 and shall be based on the following narrowly targeted prin17 ciples— 

18 ‘‘(1) that the escrow account of the payroll tax 

19 deposit agent in which such agent holds its employ20 ers’ taxes is balanced to the total of quarterly rec21 onciliation statements (i.e., Internal Revenue Service 

22 Forms 941 and State equivalents), and any liabil23 ities collected but not yet deposited with the respec24 tive government authority, 

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1 ‘‘(2) that the escrow account funds of the pay2 roll tax deposit agent are not commingled with such 

3 agent’s operating funds, 

4 ‘‘(3) that there is no evidence that the payroll 

5 tax deposit agent used any of the funds in such 

6 agent’s escrow account to pay such agent’s operating 

7 costs, and 

8 ‘‘(4) that there is adequate receipt evidence 

9 that such agent paid the required employment taxes 

10 on behalf of the employers to the proper government 

11 employment tax authority. 

12 A copy of each completed quarterly certification report 

13 shall be filed quarterly with the Secretary and no payroll 

14 tax deposit agent shall obtain its annual renewal of the 

15 registration of persons licensed to act as payroll tax de16 posit agents unless all such copies have been filed. 

17 ‘‘(d) DISCLOSURE.—The Secretary shall require pay18 roll tax deposit agents to disclose to each client prior to 

19 or at the time of contracting for payroll services, and to 

20 each existing client at least quarterly— 

21 ‘‘(1) the client’s continuing liability for payment 

22 of all Federal and State employment taxes notwith23 standing any contractual relationship with a payroll 

24 tax deposit agent, 

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1 ‘‘(2) the mechanisms available to the client to 

2 verify the amount and date of payment of all tax de3 posits made by the payroll tax deposit agent on be4 half of such client, including the Internet address 

5 and telephone number of each Federal and State 

6 employment tax authority related to such deposits, 

7 and 

8 ‘‘(3) such other information that the Secretary 

9 determines is necessary or appropriate to assist em10 ployers in the selection and use of payroll tax de11 posit agents. 

12 ‘‘(e) TAX DEPOSITS AND RETURNS.—Only persons 

13 registered under this section may— 

14 ‘‘(1) make Federal tax deposits on behalf of an 

15 employer, 

16 ‘‘(2) sign and file Federal employment tax re17 turns on behalf of a taxpayer, and 

18 ‘‘(3) have access to confidential tax information 

19 relating to such employer. 

20 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

21 such regulations as may be necessary to carry out the pro22 visions of this section.’’. 

23 (b) QUARTERLY CERTIFICATION CRITERIA.—In es24 tablishing the criteria for the quarterly certification re25 quired under section 7529(c) of the Internal Revenue 

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1 Code of 1986, as added by subsection (a), the Secretary 

2 of the Treasury shall ensure, to the extent practicable, 

3 that the burden of the certification process on the payroll 

4 tax deposit agent is minimized. 

5 (c) PAYROLL TAX DEPOSIT AGENTS SUBJECT TO

6 PENALTY FOR FAILURE TO COLLECT AND PAY OVER

7 TAX, OR ATTEMPT TO EVADE OR DEFEAT TAX.— 

8 (1) IN GENERAL.—Section 6672(a) of the In9 ternal Revenue Code of 1986 is amended by insert10 ing ‘‘, including any payroll tax deposit agent (as de11 fined in section 7531(a)(2)) who has assumed the 

12 obligation to pay over any tax by contract with a 

13 taxpayer (but only to the extent that such payroll 

14 tax deposit agent has received irrevocable payment 

15 of funds for the corresponding tax liabilities from 

16 such taxpayer),’’ after ‘‘imposed by this title’’. 

17 (2) PENALTY NOT SUBJECT TO DISCHARGE IN

18 BANKRUPTCY.—Section 6672(a) is further amended 

19 by adding at the end the following new sentence: 

20 ‘‘Notwithstanding any other provision of law, no 

21 penalty imposed under this section may be dis22 charged in bankruptcy.’’. 

23 (3) CONFORMING AMENDMENT.—Section 

24 6672(b)(1) of the Internal Revenue Code of 1986 

25 (relating to preliminary notice requirement) is 

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1 amended by striking the word ‘‘taxpayer’’ and in2 serting the word ‘‘person’’ each time it appears. 

3 (4) CONSTRUCTION.—The amendment made by 

4 paragraph (1) shall not be construed to create any 

5 inference with respect to the interpretation of sec6 tion 6672 of the Internal Revenue Code of 1986 as 

7 such section was in effect on the day before the date 

8 of the enactment of this Act. 

9 (d) CLERICAL AMENDMENT.—The table of sections 

10 for such chapter 77 is amended by adding at the end the 

11 following new item: 

‘‘Sec. 7529. Payroll tax deposit agents.’’. 

12 (e) EFFECTIVE DATES.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (2), the amendments made by this section 

15 shall take effect on the date of the enactment of this 

16 Act. 

17 (2) PENALTY.—The amendments made by sub18 section (c) shall apply to failures occurring after the 

19 date of the enactment of this Act. 

20 SEC. 3. VERIFICATION OF ADDRESS CHANGE. 

21 (a) IN GENERAL.—Chapter 25 of the Internal Rev22 enue Code of 1986 (relating to general provisions) is 

23 amended by adding at the end the following new section: 

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1 ‘‘SEC. 3511. VERIFICATION OF ADDRESS CHANGE. 

2 ‘‘The Secretary shall issue a notice of confirmation 

3 of any address change relating to an employer making tax 

4 payments under this subtitle, and such notice shall be sent 

5 to both the employer’s former and new address.’’. 

6 (b) CLERICAL AMENDMENT.—The table of sections 

7 for such chapter 25 is amended by adding at the end the 

8 following new item: 

‘‘Sec. 3511. Verification of address change.’’. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall take effect on the date that is 180 days 

11 after the date of the enactment of this Act. 

Æ 

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