Small Business Tax Fairness and Compliance Simplification Act

Subjects: Taxation

Summary:  <p> <b>Small Business Tax Fairness and Compliance Simplification Act </b></p> <p>This bill expands the tax credit for a portion of the employer-paid Social Security taxes for employee cash tips to include beauty service establishments. (Under current law, the credit is limited to tips received for providing, serving, or delivering food or beverages.)</p> <p>The credit applies to tips received in connection with providing beauty services to a customer or client if tipping employees who provide the service is customary. <i>Beauty services</i> include barbering and hair care, nail care, esthetics, and body and spa treatments.</p> <p>The bill also (1) establishes an employer tip reporting safe harbor for beauty service establishments, and (2) specifies reporting requirements for income received from renting space to individuals who provide beauty services. </p> <p>The employer tip reporting safe harbor for beauty service establishments provides an exemption from certain Internal Revenue Service tip examinations for employers who meet certain requirements for educational programs, reporting procedures, compliance with tax law, and recordkeeping.</p> <p>The Government Accountability Office must study and report on the impact of the extension of the employer social security tax credit on employers and employees. </p>

<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 45 Introduced in Senate (IS)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                 S. 45

   To amend the Internal Revenue Code of 1986 to simplify reporting 
    requirements, promote tax compliance, and reduce tip reporting 
           compliance burdens in the beauty service industry.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             January 24 (legislative day, January 3), 2023

Mr. Cardin (for himself and Mr. Scott of South Carolina) 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 simplify reporting 
    requirements, promote tax compliance, and reduce tip reporting 
           compliance burdens in the beauty service industry.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Tax Fairness and 
Compliance Simplification Act''.

SEC. 2. EXTENSION OF CREDIT FOR PORTION OF EMPLOYER SOCIAL SECURITY 
              TAXES PAID WITH RESPECT TO EMPLOYEE TIPS TO BEAUTY 
              SERVICE ESTABLISHMENTS.

    (a) Extension of Tip Credit to Beauty Service Business.--
            (1) In general.--Section 45B(b)(2) of the Internal Revenue 
        Code of 1986 is amended to read as follows:
            ``(2) Application only to certain lines of business.--In 
        applying paragraph (1) there shall be taken into account only 
        tips received from customers or clients in connection with the 
        following services:
                    ``(A) The providing, delivering, or serving of food 
                or beverages for consumption, if the tipping of 
                employees delivering or serving food or beverages by 
                customers is customary.
                    ``(B) The providing of beauty services to a 
                customer or client if the tipping of employees 
                providing such services is customary.''.
            (2) Beauty service defined.--Section 45B of such Code is 
        amended by adding at the end the following new subsection:
    ``(e) Beauty Service.--For purposes of this section, the term 
`beauty service' means any of the following:
            ``(1) Barbering and hair care.
            ``(2) Nail care.
            ``(3) Esthetics.
            ``(4) Body and spa treatments.''.
    (b) Credit Determined With Respect to Minimum Wage in Effect.--
Section 45B(b)(1)(B) of the Internal Revenue Code of 1986 is amended--
            (1) by striking ``as in effect on January 1, 2007, and''; 
        and
            (2) by inserting ``, and in the case of food or beverage 
        establishments, as in effect on January 1, 2007'' after 
        ``without regard to section 3(m) of such Act''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2023.

SEC. 3. EMPLOYER TIP REPORTING SAFE HARBOR.

    (a) In General.--Section 3121(q) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking so much as precedes ``of this chapter'' and 
        inserting the following:
    ``(q) Tips Included for Both Employee and Employer Taxes.--
            ``(1) In general.--For purposes''; and
            (2) by adding at the end the following new paragraph:
            ``(2) Tip program safe harbor.--In the case of an employer 
        who employs one or more employees who receive tips in the 
        course of such employment which are attributable to the 
        performance of beauty services (as such term is defined in 
        section 45B) are considered remuneration for such employment 
        under this section, no IRS tip examination with respect to such 
        employer shall be initiated (except in the case of a tip 
        examination of a current or former employee) if the employer--
                    ``(A) establishes an educational program regarding 
                applicable laws relating to proper reporting of tips 
                received by employees for--
                            ``(i) new employees, which shall include 
                        both verbal explanation and written materials, 
                        and
                            ``(ii) existing employees, which shall be 
                        conducted quarterly,
                    ``(B) establishes procedures for tipped employees 
                to provide monthly reporting of cash and charged 
                services and related tip income of at least $20 under 
                section 6053(a),
                    ``(C) complies with all applicable Federal tax law 
                requirements applicable to employers for purposes of 
                filing returns, and collection and payment of taxes 
                imposed, with respect to tip income received by 
                employees, and
                    ``(D) maintains employee records related to--
                            ``(i) contact information for such 
                        employees, and
                            ``(ii) gross receipts from any services 
                        subject to tipping, and charge receipts for 
                        such services, for a period of not less than 4 
                        calendar years after the calendar year to which 
                        the records relate.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2023.

SEC. 4. INFORMATION REPORTING OF INCOME FROM SPACE RENTALS IN THE 
              BEAUTY SERVICE INDUSTRY.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61 of the Internal Revenue Code of 1986, as amended by section 334(d) 
of Public Law 117-328, is amended by adding at the end the following 
new section:

``SEC. 6050AA. RETURNS RELATING TO INCOME FROM CERTAIN RENTALS OF SPACE 
              IN THE BEAUTY SERVICE INDUSTRY.

    ``(a) Requirement of Reporting.--Any person who, in the course of a 
trade or business and for any calendar year, receives rental payments 
from two or more individuals providing beauty services (as defined in 
section 45B(e)) aggregating $600 or more each for the lease of space to 
provide such services to third-party patrons shall make the return 
described in subsection (b) with respect to each person from whom such 
rent was so received at such time as the Secretary may by regulations 
prescribe.
    ``(b) Return.--A return is described in this subsection if such 
return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains--
                    ``(A) the name, address, and TIN of each person 
                from whom a rental payment described in subsection (a) 
                was received during the calendar year,
                    ``(B) the aggregate amount of such payments 
                received by such person during such calendar year and 
                the date and amount of each such payment, and
                    ``(C) such other information as the Secretary may 
                require.
    ``(c) Statement To Be Furnished to Persons With Respect to Whom 
Information Is Required.--
            ``(1) In general.--Every person required to make a return 
        under subsection (a) shall furnish to each person whose name is 
        required to be set forth in such return a written statement 
        showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                a return, and
                    ``(B) the aggregate amount of payments to the 
                person required to be shown on the return.
            ``(2) Furnishing of information.--The written statement 
        required under paragraph (1) shall be furnished to the person 
        on or before January 31 of the year following the calendar year 
        for which the return under subsection (a) is required to be 
        made.
    ``(d) Regulations and Guidance.--The Secretary may prescribe such 
regulations and other guidance as may be appropriate or necessary to 
carry out the purpose of this subsection, including rules to prevent 
duplicative reporting of transactions.''.
    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 61 of such Code is amended by adding at the end the following 
new item:

``Sec. 6050AA. Returns relating to income from certain rentals of space 
                            in the beauty service industry.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 2023.

SEC. 5. GAO STUDY.

    Not later than 5 years after the date of enactment of this Act, the 
Comptroller General shall conduct a study and submit to the Committee 
on Small Business and Entrepreneurship of the Senate and the Committee 
on Finance of the Senate a report detailing how the extension of the 
employer social security credit under section 45B of the Internal 
Revenue Code of 1986 (as amended by section 2 of this Act) has impacted 
employers and employees with respect to Federal income tax compliance 
and benefits.
                                 &lt;all&gt;
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