II 

111TH CONGRESS 

1ST SESSION S. 2882 

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 SENATE OF THE UNITED STATES 

DECEMBER 15, 2009 

Mr. KERRY (for himself, Mr. DURBIN, Mr. HARKIN, Mr. SCHUMER, Mr. 

MENENDEZ, Mr. BROWN, and Mr. KIRK) 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 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 2009’’. 


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1 SEC. 2. EXPANSION OF INFORMATION REPORTING RE2 QUIREMENTS. 

3 (a) IN GENERAL.—Section 6041 of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new subsections: 

6 ‘‘(h) APPLICATION TO CORPORATIONS.—Notwith7 standing any regulation prescribed by the Secretary before 

8 the date of the enactment of this subsection, for purposes 

9 of this section the term ‘person’ includes any corporation 

10 that is not an organization exempt from tax under section 

11 501(a). 

12 ‘‘(i) REGULATIONS.—The Secretary may prescribe 

13 such regulations and other guidance as may be appro14 priate or necessary to carry out the purposes of this sec15 tion, including rules to prevent duplicative reporting of 

16 transactions.’’. 

17 (b) PAYMENTS FOR PROPERTY AND OTHER GROSS

18 PROCEEDS.—Subsection (a) of section 6041 of the Inter19 nal Revenue Code of 1986 is amended— 

20 (1) by inserting ‘‘amounts in consideration for 

21 property,’’ after ‘‘wages,’’, 

22 (2) by inserting ‘‘gross proceeds,’’ after ‘‘emolu23 ments, or other’’, and 

24 (3) by inserting ‘‘gross proceeds,’’ after ‘‘setting 

25 forth the amount of such’’. 


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

2 this section shall apply to payments made after December 

3 31, 2011. 

4 SEC. 3. DETERMINATION OF ELIGIBILITY FOR SAFE HAR5 BOR TREATMENT OF INDIVIDUALS AS NON6 EMPLOYEES FOR PURPOSES OF EMPLOY7 MENT TAXES. 

8 (a) IN GENERAL.—Chapter 25 of the Internal Rev9 enue Code of 1986 (relating to general provisions relating 

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

11 the following new section: 

12 ‘‘SEC. 3511. SAFE HARBOR. 

13 ‘‘(a) TERMINATION OF CERTAIN EMPLOYMENT TAX

14 LIABILITY.— 

15 ‘‘(1) IN GENERAL.—If— 

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

17 taxpayer did not treat an individual as an em18 ployee for any period, and 

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

20 31, 1978, all Federal tax returns (including in21 formation returns) required to be filed by the 

22 taxpayer with respect to such individual for 

23 such period are filed on a basis consistent with 

24 the taxpayer’s treatment of such individual as 

25 not being an employee, 


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1 then, for purposes of applying such taxes for such 

2 period with respect to the taxpayer, the individual 

3 shall be deemed not to be an employee unless the 

4 taxpayer had no reasonable basis for not treating 

5 such individual as an employee. This paragraph shall 

6 not apply with respect to an individual for any peri7 ods beginning after the date of notice of a deter8 mination that such individual should be treated as 

9 an employee of the taxpayer. 

10 ‘‘(2) STATUTORY STANDARDS FOR SATISFYING

11 THE REQUIREMENTS OF PARAGRAPH (1).—For pur12 poses of paragraph (1), a taxpayer shall be treated 

13 as having a reasonable basis for not treating an indi14 vidual as an employee only if— 

15 ‘‘(A) the taxpayer’s treatment of such indi16 vidual was in reasonable reliance on— 

17 ‘‘(i) a written determination issued to 

18 the taxpayer addressing the employment 

19 status of such individual or another indi20 vidual holding a substantially similar posi21 tion with the taxpayer, or 

22 ‘‘(ii) a concluded examination (for em23 ployment tax purposes) of whether such in24 dividual (or another individual holding a 

25 substantially similar position) should be 


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1 treated as an employee of the taxpayer, 

2 with respect to which there was no deter3 mination that such individual (or another 

4 individual holding a substantially similar 

5 position) should be treated as an employee, 

6 and 

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

8 not treated any other individual holding a sub9 stantially similar position as an employee for 

10 purposes of employment taxes for any period 

11 beginning after December 31, 1977. 

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

13 ‘‘(1) EMPLOYMENT TAX.—The term ‘employ14 ment tax’ means any tax imposed by this subtitle. 

15 ‘‘(2) EMPLOYMENT STATUS.—The term ‘em16 ployment status’ means the status of an individual, 

17 under the usual common law rules applicable in de18 termining the employer-employee relationship, as an 

19 employee or as an independent contractor (or other 

20 individual who is not an employee). 

21 ‘‘(c) SPECIAL RULES FOR APPLICATION OF SEC22 TION.— 

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

24 An officer or employee of the Internal Revenue Serv25 ice shall, before or at the commencement of any exVerDate Nov 24 2008 00:29 Dec 16, 2009 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2882.IS S2882

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1 amination relating to the employment status of one 

2 or more individuals who perform services for the tax3 payer, provide the taxpayer with a written notice of 

4 the provisions of this section. 

5 ‘‘(2) RULES RELATING TO STATUTORY STAND6 ARDS.—For purposes of subsection (a)(2), with re7 spect to any period beginning after the date of the 

8 enactment of this paragraph, a taxpayer may not 

9 rely on an examination commenced, or a written de10 termination issued, if— 

11 ‘‘(A) the controlling facts and cir12 cumstances that formed the basis of a deter13 mination of employment status have changed or 

14 were misrepresented by the taxpayer, or 

15 ‘‘(B) the Secretary subsequently issues 

16 contrary guidance relating to the determination 

17 of employment status that has bearing on the 

18 facts and circumstances that formed the basis 

19 of a determination of employment status. 

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

21 purposes of this section, the determination as to 

22 whether an individual holds a position substantially 

23 similar to a position held by another individual shall 

24 be made by the Secretary in a manner consistent 

25 with the Fair Labor Standards Act of 1938. 


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

2 entitlement to relief under this section by a preponderance 

3 of the evidence. 

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

5 ‘‘(1) IN GENERAL.—Under procedures estab6 lished by the Secretary not later than 1 year after 

7 the date of the enactment of this section, any indi8 vidual who performs services for a taxpayer may pe9 tition (either personally or through a designated rep10 resentative or attorney) for a determination of the 

11 individual’s status for employment tax purposes. 

12 ‘‘(2) ADMINISTRATIVE PROCEDURES.—The pro13 cedures established under paragraph (1) shall pro14 vide for— 

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

16 than 90 days after the filing of the petition 

17 with respect to employment in any industry 

18 (such as the construction industry) in which 

19 employment is transient, casual, or seasonal, 

20 and 

21 ‘‘(B) an administrative appeal of any de22 termination that an individual is not an em23 ployee of the taxpayer. 

24 ‘‘(3) DUTY TO SEEK SERVICE PROVIDER INFOR25 MATION.—In the case of a request by a taxpayer for 


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1 a determination of an individual’s status for employ2 ment tax purposes, the Secretary shall, to the extent 

3 practicable— 

4 ‘‘(A) seek to obtain from such individual 

5 information relating to the individual’s perform6 ance of services for the taxpayer, and 

7 ‘‘(B) provide written notice to the indi8 vidual detailing any written determination of 

9 the individual’s status for employment tax pur10 poses. 

11 ‘‘(f) RESULTS OF MISCLASSIFICATION DETERMINA12 TIONS.—In any case in which the Secretary determines 

13 that a taxpayer has misclassified an individual as not an 

14 employee for employment tax purposes, the Secretary shall 

15 inform the Secretary of Labor about such misclassification 

16 and notify the individual of any eligibility for the refund 

17 of self-employment taxes under chapter 2. 

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

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

20 prescribe such regulations as may be necessary and appro21 priate to carry out the purposes of this section.’’. 

22 (b) CONFORMING AMENDMENTS.— 

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

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

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


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1 (2) The table of sections for chapter 25 of such 

2 Code is amended by adding at the end the following 

3 new item: 

‘‘Sec. 3511. Safe harbor.’’. 

4 (c) TERMINATION OF SECTION 530 OF THE REV5 ENUE ACT OF 1978.—Section 530 of the Revenue Act of 

6 1978 shall not apply to services rendered more than 1 year 

7 after the date of the enactment of this Act. 

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

9 this section shall apply to services rendered more than 1 

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

11 SEC. 4. ANNUAL REPORTS ON WORKER 

12 MISCLASSIFICATION. 

13 The Secretary of the Treasury shall issue an annual 

14 report on worker misclassification. Such report shall in15 clude the following: 

16 (1) Information on the number and type of en17 forcement actions against, and examinations of, em18 ployers who have misclassified workers. 

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

20 against, and examinations of, employers who have 

21 misclassified workers. 

22 (3) An overall estimate of the number of em23 ployers misclassifying workers, the number of work24 ers affected, and the industries involved. 


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1 (4) The impact of such misclassification on the 

2 Federal tax system. 

3 (5) Information on the outcomes of the peti4 tions filed under section 3511(e) of the Internal 

5 Revenue Code of 1986. 

6 SEC. 5. INCREASE IN INFORMATION RETURN PENALTIES. 

7 (a) FAILURE TO FILE CORRECT INFORMATION RE8 TURNS.— 

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

10 Internal Revenue Code of 1986 is amended— 

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

12 ‘‘$250’’, and 

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

14 ‘‘$3,000,000’’. 

15 (2) REDUCTION WHERE CORRECTION IN SPECI16 FIED PERIOD.— 

17 (A) CORRECTION WITHIN 30 DAYS.—Sec18 tion 6721(b)(1) of such Code is amended— 

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

20 ‘‘$50’’, 

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

22 ‘‘$250’’, and 

23 (iii) by striking ‘‘$75,000’’ and insert24 ing ‘‘$500,000’’. 


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1 (B) FAILURES CORRECTED ON OR BEFORE

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

3 amended— 

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

5 ‘‘$100’’, 

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

7 ‘‘$250’’, and 

8 (iii) by striking ‘‘$150,000’’ and in9 serting ‘‘$1,500,000’’. 

10 (3) LOWER LIMITATION FOR PERSONS WITH

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

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

13 (A) in subparagraph (A)— 

14 (i) by striking ‘‘$100,000’’ and insert15 ing ‘‘$1,000,000’’, and 

16 (ii) by striking ‘‘$250,000’’ and in17 serting ‘‘$3,000,000’’, 

18 (B) in subparagraph (B)— 

19 (i) by striking ‘‘$25,000’’ and insert20 ing ‘‘$175,000’’, and 

21 (ii) by striking ‘‘$75,000’’ and insert22 ing ‘‘$500,000’’, and 

23 (C) in subparagraph (C)— 

24 (i) by striking ‘‘$50,000’’ and insert25 ing ‘‘$500,000’’, and 


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

3 (4) PENALTY IN CASE OF INTENTIONAL DIS4 REGARD.—Section 6721(e) of such Code is amend5 ed— 

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

7 and inserting ‘‘$500’’, and 

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

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

10 (b) FAILURE TO FURNISH CORRECT PAYEE STATE11 MENTS.— 

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

13 Code is amended— 

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

15 ‘‘$250’’, and 

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

17 ‘‘$1,000,000’’. 

18 (2) PENALTY IN CASE OF INTENTIONAL DIS19 REGARD.—Section 6722(c) of such Code is amend20 ed— 

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

22 and inserting ‘‘$500’’, and 

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

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


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1 (c) FAILURE TO COMPLY WITH OTHER INFORMA2 TION REPORTING REQUIREMENTS.—Section 6723 of such 

3 Code is amended— 

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

5 and 

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

7 ‘‘$1,000,000’’. 

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

9 this section shall apply with respect to information returns 

10 required to be filed after December 31, 2009. 

Æ 


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