I 
112TH CONGRESS 
2D SESSION 
H. R. 4123 
To amend the Internal Revenue Code of 1986 to permit the Secretary of 
the Treasury to issue prospective guidance clarifying the employment 
status of individuals for purposes of employment taxes and to prevent 
retroactive assessments with respect to such clarifications. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 1, 2012 
Mr. MCDERMOTT (for himself, Mr. ACKERMAN, Mr. MCGOVERN, Mr. PASTOR 
of Arizona, Mr. STARK, Ms. SUTTON, Mr. TIERNEY, Mr. KIND, Ms. 
DELAURO, Mr. RANGEL, Ms. CHU, Mr. LEVIN, Mr. BRADY of Pennsyl-
vania, Mr. LOEBSACK, Mr. VISCLOSKY, Mr. JACKSON of Illinois, Mr. 
HASTINGS of Florida, Ms. SCHAKOWSKY, Mr. NADLER, Mr. WALZ of 
Minnesota, Ms. SPEIER, Ms. MCCOLLUM, Mrs. MALONEY, Mr. CONYERS, 
Ms. NORTON, Mr. GUTIERREZ, Mr. HOLT, and Mr. LEWIS of Georgia) 
introduced the following bill; which was referred to the Committee on 
Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to permit 
the Secretary of the Treasury to issue prospective guid-
ance clarifying the employment status of individuals for 
purposes of employment taxes and to prevent retroactive 
assessments with respect to such clarifications. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
SECTION 1. SHORT TITLE; FINDINGS; PURPOSES. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Fair Playing Field Act of 2012’’. 
(b) FINDINGS.—Congress makes the following find-
ings: 
(1) In 1978, Congress was concerned that lack 
of clarity as to the proper classification of some 
workers, increased IRS enforcement activity, and 
retroactive application by IRS of interpretations that 
were arguably new had caused hardships for some 
small businesses and other taxpayers and confusion 
as to the applicable rules. 
(2) To allow time to develop a comprehensive 
approach to the problem, Congress enacted section 
530 of the Revenue Act of 1978 as an interim meas-
ure protecting taxpayers from liability for misclassi-
fication if the taxpayer has a reasonable basis for 
classifying a worker as an independent contractor 
and meets certain other conditions. In addition, the 
Act prohibited the Secretary of the Treasury from 
publishing regulations or revenue rulings on work-
ers’ employment tax status pending the expected 
near-term enactment of clarifying legislation. 
(3) During the ensuing 33 years, Congress 
made section 530 of the Revenue Act of 1978 per-
manent, however, changes in working relationships 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
and the continued prohibition on new guidance have 
increased the uncertainty as to the proper classifica-
tion of workers. 
(4) Many workers are properly classified as 
independent contractors. In other instances, workers 
who are employees are being treated as independent 
contractors. Such misclassification for tax purposes 
contributes to inequities in the competitive positions 
of businesses and to the Federal and State tax gap, 
and may also result in misclassification for other 
purposes, such as denial of unemployment benefits, 
workplace health and safety protections, and retire-
ment or other benefits or protections available to 
employees. 
(5) Workers, businesses, and other taxpayers 
will benefit from clear guidance regarding employ-
ment tax status. In the interest of fairness and in 
view of many service recipients’ reliance on current 
section 530, such guidance should apply only pro-
spectively. 
(c) PURPOSES.—The purposes of this Act are to per-
mit the Secretary of the Treasury to provide guidance al-
lowing workers and businesses to clearly understand the 
proper Federal tax classification of workers and to provide 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
relief allowing an orderly transition to new rules designed 
to increase certainty and uniformity of treatment. 
SEC. 2. AUTHORITY TO ISSUE GUIDANCE CLARIFYING EM-
PLOYMENT STATUS FOR PURPOSES OF EM-
PLOYMENT TAXES. 
(a) IN GENERAL.—Chapter 25 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new section: 
‘‘SEC. 3511. AUTHORITY TO ISSUE GUIDANCE CLARIFYING 
EMPLOYMENT STATUS. 
‘‘(a) IN GENERAL.—The Secretary shall issue such 
regulations or other guidance as the Secretary determines 
to be necessary or appropriate to clarify the proper em-
ployment status of individuals for purposes of any tax im-
posed by this subtitle. 
‘‘(b) 
PROHIBITION
ON
RETROACTIVE
ASSESS-
MENTS.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) for purposes of any tax imposed by 
this subtitle, the taxpayer did not treat an indi-
vidual as an employee for any period before the 
reclassification date with respect to such indi-
vidual, and 
‘‘(B) in the case of periods after December 
31, 1978, and before such reclassification date, 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
all Federal tax returns (including information 
returns) required to be filed by the taxpayer 
with respect to such individual for such period 
are filed on a basis consistent with the tax-
payer’s treatment of such individual as not 
being an employee, 
then, for purposes of applying such taxes for periods 
before such reclassification date with respect to the 
taxpayer, the individual shall be deemed not to be an 
employee unless the taxpayer had no reasonable 
basis for not treating such individual as an em-
ployee. 
‘‘(2) STATUTORY STANDARDS PROVIDING ONE 
METHOD
OF
SATISFYING
THE
REQUIREMENTS
OF 
PARAGRAPH (1).—For purposes of paragraph (1), a 
taxpayer shall in any case be treated as having a 
reasonable basis for not treating an individual as an 
employee for a period if the taxpayer’s treatment of 
such individual for such period was in reasonable re-
liance on any of the following: 
‘‘(A) Judicial precedent, published rulings, 
technical advice with respect to the taxpayer, or 
a letter ruling to the taxpayer. 
‘‘(B) A past Internal Revenue Service 
audit of the taxpayer in which there was no as-
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
sessment attributable to the treatment (for pur-
poses of any tax imposed by this subtitle) of the 
individuals holding positions substantially simi-
lar to the position held by such individual. 
‘‘(C) Long-standing recognized practice of 
a significant segment of the industry in which 
such individual was engaged. 
‘‘(3) CONSISTENCY REQUIRED IN THE CASE OF 
PRIOR TAX TREATMENT.—Paragraph (1) shall not 
apply with respect to the treatment of any individual 
(hereafter in this paragraph referred to as the re-
classified individual) for purposes of any tax im-
posed by this subtitle for any period ending after 
December 31, 1978, if the taxpayer (or a prede-
cessor) has treated any individual holding a substan-
tially similar position as an employee for purposes of 
any tax imposed by this subtitle for any period be-
ginning after December 31, 1977, and ending before 
the reclassification date with respect to such reclas-
sified individual. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) RECLASSIFICATION DATE.— 
‘‘(A) IN GENERAL.—The term ‘reclassifica-
tion date’ means, with respect to any individual, 
the earlier of— 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
‘‘(i) the first day of the first calendar 
quarter beginning more than 180 days 
after the date of an employee classification 
determination with respect to such indi-
vidual, or 
‘‘(ii) the effective date of the first ap-
plicable final regulation issued by the Sec-
retary under subsection (a) with respect to 
such individual (or, if later, the first day of 
the first calendar quarter beginning more 
than 180 days after such regulation is 
issued). 
‘‘(B) EMPLOYEE CLASSIFICATION DETER-
MINATION.—The term ‘employee classification 
determination’ means, with respect to any indi-
vidual, a determination by the Secretary, in 
connection with an audit of the taxpayer which 
is described in section 7436 and which com-
mences after the date which is 1 year after the 
date of the enactment of this section, that a 
class of individuals holding positions with such 
taxpayer which are substantially similar to the 
position held by such individual are employees. 
‘‘(C) FIRST APPLICABLE FINAL REGULA-
TION.—The term ‘first applicable final regula-
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
tion’ means, with respect to any individual, the 
first final regulation (or other guidance of gen-
eral applicability) which sets forth the factors 
for determining the employment status of a 
class of individuals holding positions substan-
tially similar to the position held by such indi-
vidual. 
‘‘(2) EMPLOYMENT
STATUS.—The term ‘em-
ployment status’ means the status of an individual, 
under the usual common law rules applicable in de-
termining the employer-employee relationship, as an 
employee or as an independent contractor (or other 
individual who is not an employee). 
‘‘(d) CONTINUATION OF CERTAIN SPECIAL RULES.— 
‘‘(1) EXCEPTION FOR CERTAIN SKILLED WORK-
ERS.—Subsection (b) shall not apply in the case of 
an individual who, pursuant to an arrangement be-
tween the taxpayer and another person, provides 
services for such other person as an engineer, de-
signer, drafter, computer programmer, systems ana-
lyst, or other similarly skilled worker engaged in a 
similar line of work. 
‘‘(2) NOTICE OF AVAILABILITY OF SECTION.— 
An officer or employee of the Internal Revenue Serv-
ice shall, before or at the commencement of any 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
audit inquiry relating to the employment status of 
one or more individuals who perform services for the 
taxpayer, provide the taxpayer with a written notice 
of the provisions of this section. 
‘‘(3) RULES RELATING TO STATUTORY STAND-
ARDS.—For purposes of subsection (b)(2)— 
‘‘(A) a taxpayer may not rely on an audit 
commenced after December 31, 1996, for pur-
poses of subparagraph (B) thereof unless such 
audit included an examination for purposes of 
any tax imposed by this subtitle whether the in-
dividual involved (or any individual holding a 
position substantially similar to the position 
held by the individual involved) should be treat-
ed as an employee of the taxpayer, 
‘‘(B) in no event shall the significant seg-
ment requirement of subparagraph (C) thereof 
be construed to require a reasonable showing of 
the practice of more than 25 percent of the in-
dustry (determined by not taking into account 
the taxpayer), and 
‘‘(C) in applying the long-standing recog-
nized practice requirement of subparagraph (C) 
thereof— 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
‘‘(i) such requirement shall not be 
construed as requiring the practice to have 
continued for more than 10 years, and 
‘‘(ii) a practice shall not fail to be 
treated as long-standing merely because 
such practice began after 1978. 
‘‘(4) AVAILABILITY OF SAFE HARBORS.—Noth-
ing in this section shall be construed to provide that 
subsection (b) only applies where the individual in-
volved is otherwise an employee of the taxpayer. 
‘‘(5) BURDEN OF PROOF.— 
‘‘(A) IN GENERAL.—If— 
‘‘(i) a taxpayer establishes a prima 
facie case that it was reasonable not to 
treat an individual as an employee for pur-
poses of subsection (b), and 
‘‘(ii) the taxpayer has fully cooperated 
with reasonable requests from the Sec-
retary, 
then the burden of proof with respect to such 
treatment shall be on the Secretary. 
‘‘(B) EXCEPTION FOR OTHER REASONABLE 
BASIS.—In the case of any issue involving 
whether the taxpayer had a reasonable basis 
not to treat an individual as an employee for 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
purposes of subsection (b), subparagraph (A) 
shall only apply for purposes of determining 
whether the taxpayer meets the requirements of 
subparagraph (A), (B), or (C) of subsection 
(b)(2). 
‘‘(6) PRESERVATION
OF
PRIOR
PERIOD
SAFE 
HARBOR.—If— 
‘‘(A) an individual would (but for the 
treatment referred to in subparagraph (B)) be 
deemed not to be an employee of the taxpayer 
under subsection (b) for any prior period, and 
‘‘(B) such individual is treated by the tax-
payer as an employee for purposes of the taxes 
imposed by this subtitle for any subsequent pe-
riod, 
then, for purposes of applying such taxes for such 
prior period with respect to the taxpayer, the indi-
vidual shall be deemed not to be an employee. 
‘‘(7) SUBSTANTIALLY SIMILAR POSITION.—For 
purposes of subsection (b) and this subsection, the 
determination as to whether an individual holds a 
position substantially similar to a position held by 
another individual shall include consideration of the 
relationship between the taxpayer and such individ-
uals. 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00011
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
‘‘(8) TREATMENT OF TEST ROOM SUPERVISORS 
AND PROCTORS WHO ASSIST IN THE ADMINISTRA-
TION
OF
COLLEGE
ENTRANCE
AND
PLACEMENT 
EXAMS.— 
‘‘(A) IN GENERAL.—In the case of an indi-
vidual described in subparagraph (B) who is 
providing services as a test proctor or room su-
pervisor by assisting in the administration of 
college entrance or placement examinations, 
subsection (b) shall be applied to such services 
performed after December 31, 2006 (and remu-
neration paid for such services) without regard 
to paragraph (3) thereof. 
‘‘(B) APPLICABILITY.—An individual is de-
scribed in this subparagraph if the individual— 
‘‘(i) is providing the services described 
in subsection (b) to an organization de-
scribed in section 501(c) and exempt from 
tax under section 501(a), and 
‘‘(ii) is not otherwise treated as an 
employee of such organization for purposes 
of this subtitle. 
‘‘(9) TREATMENT
OF
SECURITIES
BROKER 
DEALERS.—In determining for purposes of this title 
whether a registered representative of a securities 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00012
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
broker-dealer is an employee (as defined in section 
3121(d)), no weight shall be given to instructions 
from the service recipient which are imposed only in 
compliance with investor protection standards im-
posed by the Federal Government, any State govern-
ment, or a governing body pursuant to a delegation 
by a Federal or State agency. 
‘‘(e) STATEMENTS
TO
INDEPENDENT
CONTRAC-
TORS.— 
‘‘(1) IN GENERAL.—Each person who contracts 
for the services of an independent contractor on a 
regular and ongoing basis, within the scope of such 
person’s trade or business, shall provide a written 
statement to such independent contractor notifying 
such independent contractor of the Federal tax obli-
gations of an independent contractor, the labor and 
employment law protections that do not apply to 
independent contractors, and the right of such inde-
pendent contractor to seek a status determination 
from the Internal Revenue Service. 
‘‘(2) INDEPENDENT
CONTRACTOR.—For pur-
poses of this subsection, the term ‘independent con-
tractor’ means any individual who is not treated as 
an employee by the person receiving the services re-
ferred to in paragraph (1). 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
‘‘(3) TIMING OF STATEMENT.—Except as other-
wise provided by the Secretary, the statement re-
quired under paragraph (1) shall be provided within 
a reasonable period of entering into the contract re-
ferred to in paragraph (1). 
‘‘(4) DEVELOPMENT OF MODEL STATEMENT.— 
The Secretary shall develop model materials for pro-
viding the statement required under paragraph 
(1).’’. 
(b) REDUCED PENALTY NOT APPLICABLE IN CASES 
OF NONCOMPLIANCE WITH GUIDANCE WITHOUT REA-
SONABLE BASIS.—Subsection (c) of section 3509 of such 
Code is amended— 
(1) by striking ‘‘if such liability’’ and inserting 
‘‘if— 
‘‘(1) such liability’’, and 
(2) by striking the period at the end and insert-
ing ‘‘, or 
‘‘(2) such liability relates to an individual who 
is treated as an employee under regulations or other 
guidance issued by the Secretary under section 
3511(a) and the taxpayer lacks a reasonable basis 
for treating the individual as other than an em-
ployee. 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00014
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
In the case of a taxpayer which has received a final written 
determination from the Internal Revenue Service holding 
that the individual referred to in paragraph (2) (or an-
other individual who holds a position with the taxpayer 
substantially similar to the position held by such indi-
vidual) is an employee, such taxpayer shall be treated for 
purposes of paragraph (2) as lacking a reasonable basis 
for treating such individual as other than an employee 
with respect to periods beginning on and after the first 
day of the first calendar quarter beginning more than 180 
days after the date of such written determination unless 
the taxpayer establishes by clear and convincing evidence 
that the taxpayer has a reasonable basis for such treat-
ment.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 6724(d) of such 
Code is amended by striking ‘‘or’’ at the end of sub-
paragraph (GG), by striking the period at the end 
of subparagraph (HH) and inserting ‘‘, or’’, and by 
inserting after subparagraph (HH) the following 
new subparagraph: 
‘‘(II) section 3511(e) (relating to state-
ments to independent contractors).’’. 
(2) Paragraph (2) of section 7436(a) of such 
Code is amended by striking ‘‘subsection (a) of sec-
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00015
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
tion 530 of the Revenue Act of 1978’’ and inserting 
‘‘section 3511(b)’’. 
(3) The table of sections for chapter 25 of such 
Code is amended by adding at the end the following 
new item: 
‘‘Sec. 3511. Authority to issue guidance clarifying employment status.’’. 
(d) TERMINATION OF SECTION 530 OF THE REV-
ENUE ACT OF 1978.—The Revenue Act of 1978 is amend-
ed by striking section 530. 
(e) REPORTS ON WORKER MISCLASSIFICATION.—Be-
ginning with the first fiscal year beginning after the date 
the first regulation or other guidance is issued for public 
comment under section 3511(a) of the Internal Revenue 
Code of 1986 (as added by this section): 
(1) A report each fiscal year on worker classi-
fication which shall include the total number of ex-
aminations of employers initiated because of sus-
pected worker classification issues, the total number 
of examinations that included determinations on 
worker classification issues, the amount of additional 
tax liabilities associated with worker classification 
enforcement actions, the number of workers reclassi-
fied as a result of these actions, the number of re-
quests for Determination of Worker Status (Form 
SS–8), and technical guidance on how to understand 
the data provided in the report. 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00016
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
(2) A report each fiscal year in which new sta-
tistically valid data is compiled and interpreted on 
worker classification, prepared on the basis of infor-
mation gathered during an Employment Tax Study 
conducted by the National Research Program (NRP) 
of the Internal Revenue Service. Such report shall 
provide statistical estimates of the number of em-
ployers misclassifying workers, the number of work-
ers misclassified, the industries involved, data inter-
pretations and conclusions, and a description of the 
impact of improper worker classification on the em-
ployment tax gap. 
(f) EFFECTIVE DATES.— 
(1) DELAYED
EFFECTIVE
DATE
OF
REGULA-
TIONS AND GUIDANCE.—Except as provided in para-
graph (2), any regulation or other guidance issued 
under section 3511(a) of the Internal Revenue Code 
of 1986, as added by this section, shall not apply to 
services rendered before the date which is 1 year 
after the date of the enactment of this Act. 
(2) TREATMENT OF SECURITIES BROKER DEAL-
ERS.—Paragraph (9) of section 3511(d) of the In-
ternal Revenue Code of 1986, as added by this sec-
tion, shall apply to services performed after Decem-
ber 31, 1997. 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00017
Fmt 6652
Sfmt 6201
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS
(3) AUTHORITY TO ISSUE REGULATIONS AND 
GUIDANCE IMMEDIATELY.—So much of the amend-
ment made by subsection (d) as relates to subsection 
(b) of section 530 of the Revenue Act of 1978 shall 
take effect on the date of the enactment of this Act. 
(4) DELAYED TERMINATION OF REMAINDER OF 
SECTION 530 OF THE REVENUE ACT OF 1978.—Ex-
cept as provided in paragraph (3), the amendments 
made by subsections (c)(1) and (d) shall apply to 
services rendered on or after the date which is 1 
year after the date of the enactment of this Act. 
Æ 
VerDate Mar 15 2010 
02:16 Mar 02, 2012
Jkt 019200
PO 00000
Frm 00018
Fmt 6652
Sfmt 6301
E:\BILLS\H4123.IH
H4123
smartinez on DSK6TPTVN1PROD with BILLS