‘‘(B) DETERMINATIONS WITH RESPECT TO
A SERVICE PROVIDER.—A determination by the
Secretary that a service provider should have
been treated as an employee shall be effective
no earlier than the notice date if—
‘‘(i) the service provider entered into a
contract satisfying the requirements of
subsection (d),
‘‘(ii) the service provider satisfied the
applicable reporting requirements of sec-
tions 6012(a) and 6017 for all taxable
years covered by the agreement described
in clause (i), and
‘‘(iii) 
the 
service 
provider 
dem-
onstrates a reasonable basis for determin-
ing that the service provider is not an em-
ployee and that such determination was
made in good faith.
‘‘(C) REASONABLE
CAUSE
EXCEPTION.—
The requirements of subparagraph (A)(ii) or
(B)(ii) shall be treated as being met if the fail-
ure to satisfy the applicable reporting require-
ments is due to reasonable cause and not willful
neglect.
‘‘(2) CONSTRUCTION.—Nothing in this sub-
section shall be construed as limiting any provision
of law that provides an opportunity for administra-
tive or judicial review of a determination by the Sec-
retary.
‘‘(3) NOTICE DATE.—For purposes of this sub-
section, the notice date is the 30th day after the ear-
lier of—
‘‘(A) the date on which the first letter of
proposed deficiency that allows the service pro-
vider, the service recipient, or the payor an op-
portunity for administrative review in the Inter-
nal Revenue Service Office of Appeals is sent,
or
‘‘(B) the date on which the deficiency no-
tice under section 6212 is sent.
‘‘(h) DEFINITIONS.—For the purposes of this sec-
tion—
‘‘(1) SERVICE
PROVIDER.—The term ‘service
provider’ means any individual who performs a serv-
ice for another person.
‘‘(2) SERVICE RECIPIENT.—Except as provided
in paragraph (4), the term ‘service recipient’ means
the person for whom the service provider performs
such service.
‘‘(3) PAYOR.—Except as provided in paragraph
(4), the term ‘payor’ means the person who pays the
service provider for the performance of such service
in the event that the service recipient does not pay
the service provider.
‘‘(4) EXCEPTIONS.—The terms ‘service recipi-
ent’ and ‘payor’ do not include any entity in which
the service provider owns in excess of 5 percent of—
‘‘(A) in the case of a corporation, the total
combined voting power of stock in the corpora-
tion, or
‘‘(B) in the case of an entity other than a
corporation, the profits or beneficial interests in
the entity.
‘‘(5) IN CONNECTION WITH PERFORMING THE
SERVICE.—The term ‘in connection with performing
the service’ means in connection or related to the op-
eration of the service provider’s trade or business.
‘‘(6) PRINCIPAL
PLACE
OF
BUSINESS.—For
purposes of subsection (c), a home office shall in any
case qualify as the principal place of business if—
‘‘(A) the office is the location where the
service provider’s essential administrative or
management activities are conducted on a regu-
lar and systematic (and not incidental) basis by
the service provider, and
‘‘(B) the office is necessary because the
service provider has no other location for the
performance of the essential administrative or
management activities of the business.
‘‘(7) FAIR MARKET RENT.—The term ‘fair mar-
ket rent’ means a periodic, fixed minimum rental fee
which is based on the fair rental value of the facili-
ties and is established pursuant to a written agree-
ment with terms similar to those offered to unre-
lated persons for facilities of similar type and qual-
ity.’’
(b) CLARIFICATION
OF RULES REGARDING EVI-
DENCE
OF
CONTROL.—For purposes of determining
whether an individual is an employee under the Internal
Revenue Code of 1986 (26 U.S.C. 1 et seq.), compliance
with statutory or regulatory standards shall not be treated
as evidence of control.
(c) REPEAL OF SECTION 530(d) OF THE REVENUE
ACT OF 1978.—Section 530(d) of the Revenue Act of
1978 (as added by section 1706 of the Tax Reform Act
of 1986) is repealed.
(d) CLERICAL AMENDMENT.—The table of sections
for chapter 25 of such Code is amended by adding at the
end the following new item:
‘‘Sec. 3511. Safe harbor for determining that certain individuals
are not employees.’’
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by,
and the provisions of, this section shall apply to
services performed after the date of enactment of
this Act.
(2) DETERMINATIONS BY SECRETARY.—Section
3511(g) of the Internal Revenue Code of 1986 (as
added by subsection (a)) shall apply to determina-
tions after the date of enactment of this Act.
(3) SECTION 530(d).—The amendment made by
subsection (c) shall apply to periods ending after the
date of enactment of this Act.
Æ