I 
111TH CONGRESS 
1ST SESSION H. R. 3408 
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 HOUSE OF REPRESENTATIVES 
JULY 30, 2009 
Mr. MCDERMOTT
(for himself, Mr. NEAL
of Massachusetts, and Mr. 
TIERNEY) introduced the following bill; which was referred to the Com-
mittee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to modify 
the rules relating to the treatment of individuals as inde-
pendent contractors or employees, and for other pur-
poses. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Taxpayer Responsi-
bility, Accountability, and Consistency Act of 2009’’. 
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SEC. 2. INFORMATION REPORTING FOR PAYMENTS TO COR-
PORATIONS. 
(a) IN GENERAL.—Section 6041 of the Internal Rev-
enue Code of 1986 (relating to information at source) is 
amended by adding at the end the following new sub-
section: 
‘‘(h) PAYMENTS TO CORPORATIONS.— 
‘‘(1) IN GENERAL.—Notwithstanding any regu-
lations prescribed by the Secretary before the date 
of the enactment of this subsection, subsection (a) 
shall apply to payments made to a corporation. 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to payments made to a hospital or extended 
care facility described in section 501(c)(3) which is 
exempt from taxation under section 501(a) or to a 
hospital or extended care facility owned and oper-
ated by the United States, a State, the District of 
Columbia, a possession of the United States, or a 
political subdivision, agency or instrumentality of 
any of the foregoing.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments made more than 1 
year after the date of the enactment of this Act. 
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SEC. 3. DETERMINATION OF ELIGIBILITY FOR SAFE HAR-
BOR TREATMENT OF INDIVIDUALS AS NON- 
EMPLOYEES FOR PURPOSES OF EMPLOY-
MENT TAXES. 
(a) IN GENERAL.—Chapter 25 of the Internal Rev-
enue Code of 1986 (relating to general provisions relating 
to employment taxes) is amended by adding at the end 
the following new section: 
‘‘SEC. 3511. SAFE HARBOR. 
‘‘(a) TERMINATION OF CERTAIN EMPLOYMENT TAX 
LIABILITY.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) for purposes of employment taxes, the 
taxpayer did not treat an individual as an em-
ployee for any period, and 
‘‘(B) in the case of periods after December 
31, 1978, all Federal tax returns (including in-
formation returns) required to be filed by the 
taxpayer with respect to such individual for 
such period are filed on a basis consistent with 
the taxpayer’s treatment of such individual as 
not being an employee, 
then, for purposes of applying such taxes for such 
period 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 
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such individual as an employee. This paragraph shall 
not apply with respect to an individual for any peri-
ods beginning after the date of notice of a deter-
mination that such individual should be treated as 
an employee of the taxpayer. 
‘‘(2) STATUTORY STANDARDS FOR SATISFYING 
THE REQUIREMENTS OF PARAGRAPH (1).—For pur-
poses of paragraph (1), a taxpayer shall be treated 
as having a reasonable basis for not treating an indi-
vidual as an employee only if— 
‘‘(A) the taxpayer’s treatment of such indi-
vidual was in reasonable reliance on— 
‘‘(i) a written determination issued to 
the taxpayer addressing the employment 
status of such individual or another indi-
vidual holding a substantially similar posi-
tion with the taxpayer, or 
‘‘(ii) a concluded examination (for em-
ployment tax purposes) of whether such in-
dividual (or another individual holding a 
substantially similar position) should be 
treated as an employee of the taxpayer, 
with respect to which there was no deter-
mination that such individual (or another 
individual holding a substantially similar 
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position) should be treated as an employee, 
and 
‘‘(B) the taxpayer (or a predecessor) has 
not treated any other individual holding a sub-
stantially similar position as an employee for 
purposes of employment taxes for any period 
beginning after December 31, 1977. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) EMPLOYMENT
TAX.—The term ‘employ-
ment tax’ means any tax imposed by this subtitle. 
‘‘(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). 
‘‘(c) SPECIAL RULES
FOR APPLICATION
OF SEC-
TION.— 
‘‘(1) NOTICE OF AVAILABILITY OF SECTION.— 
An officer or employee of the Internal Revenue Serv-
ice shall, before or at the commencement of any ex-
amination relating to the employment status of one 
or more individuals who perform services for the tax-
payer, provide the taxpayer with a written notice of 
the provisions of this section. 
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‘‘(2) RULES RELATING TO STATUTORY STAND-
ARDS.—For purposes of subsection (a)(2), with re-
spect to any period beginning after the date of the 
enactment of this paragraph, a taxpayer may not 
rely on an examination commenced, or a written de-
termination issued, if— 
‘‘(A) 
the 
controlling 
facts 
and 
cir-
cumstances that formed the basis of a deter-
mination of employment status have changed or 
were misrepresented by the taxpayer, or 
‘‘(B) the Secretary subsequently issues 
contrary guidance relating to the determination 
of employment status that has bearing on the 
facts and circumstances that formed the basis 
of a determination of employment status. 
‘‘(3) SUBSTANTIALLY SIMILAR POSITION.—For 
purposes of this section, the determination as to 
whether an individual holds a position substantially 
similar to a position held by another individual shall 
be made by the Secretary in a manner consistent 
with the Fair Labor Standards Act of 1938. 
‘‘(d) BURDEN OF PROOF.—A taxpayer must establish 
entitlement to relief under this section by a preponderance 
of the evidence. 
‘‘(e) PETITIONS FOR REVIEW OF STATUS.— 
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‘‘(1) IN
GENERAL.—Under procedures estab-
lished by the Secretary not later than 1 year after 
the date of the enactment of this section, any indi-
vidual who performs services for a taxpayer may pe-
tition (either personally or through a designated rep-
resentative or attorney) for a determination of the 
individual’s status for employment tax purposes. 
‘‘(2) ADMINISTRATIVE PROCEDURES.—The pro-
cedures established under paragraph (1) shall pro-
vide for— 
‘‘(A) a determination of status not later 
than 90 days after the filing of the petition 
with respect to employment in any industry 
(such as the construction industry) in which 
employment is transient, casual, or seasonal, 
and 
‘‘(B) an administrative appeal of any de-
termination that an individual is not an em-
ployee of the taxpayer. 
‘‘(3) DUTY TO SEEK SERVICE PROVIDER INFOR-
MATION.—In the case of a request by a taxpayer for 
a determination of an individual’s status for employ-
ment tax purposes, the Secretary shall, to the extent 
practicable— 
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‘‘(A) seek to obtain from such individual 
information relating to the individual’s perform-
ance of services for the taxpayer, and 
‘‘(B) provide written notice to the indi-
vidual detailing any written determination of 
the individual’s status for employment tax pur-
poses. 
‘‘(f) RESULTS OF MISCLASSIFICATION DETERMINA-
TIONS.—In any case in which the Secretary determines 
that a taxpayer has misclassified an individual as not an 
employee for employment tax purposes, the Secretary shall 
inform the Secretary of Labor about such misclassification 
and notify the individual of any eligibility for the refund 
of self-employment taxes under chapter 2. 
‘‘(g) REGULATIONS.—The Secretary shall, not later 
than 1 year after the date of the enactment of this section, 
prescribe such regulations as may be necessary and appro-
priate to carry out the purposes of this section.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 7436(a) of such 
Code is amendment by striking ‘‘section 530 of the 
Revenue Act of 1978’’ and inserting ‘‘section 3511’’. 
(2) 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.’’. 
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(c) TERMINATION OF SECTION 530 OF THE REV-
ENUE ACT OF 1978.—Section 530 of the Revenue Act of 
1978 shall not apply to services rendered more than 1 year 
after the date of the enactment of this Act. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to services rendered more than 1 
year after the date of the enactment of this Act. 
SEC. 
4. 
ANNUAL 
REPORTS 
ON 
WORKER 
MISCLASSIFICATION. 
The Secretary of the Treasury shall issue an annual 
report on worker misclassification. Such report shall in-
clude the following: 
(1) Information on the number and type of en-
forcement actions against, and examinations of, em-
ployers who have misclassified workers. 
(2) Relief obtained as a result of such actions 
against, and examinations of, employers who have 
misclassified workers. 
(3) An overall estimate of the number of em-
ployers misclassifying workers, the number of work-
ers affected, and the industries involved. 
(4) The impact of such misclassification on the 
Federal tax system. 
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(5) Information on the outcomes of the peti-
tions filed under section 3511(e) of the Internal 
Revenue Code of 1986. 
SEC. 5. INCREASE IN INFORMATION RETURN PENALTIES. 
(a) FAILURE TO FILE CORRECT INFORMATION RE-
TURNS.— 
(1) IN GENERAL.—Section 6721(a)(1) of the 
Internal Revenue Code of 1986 is amended— 
(A) by striking ‘‘$50’’ and inserting 
‘‘$250’’, and 
(B) by striking ‘‘$250,000’’ and inserting 
‘‘$3,000,000’’. 
(2) REDUCTION WHERE CORRECTION IN SPECI-
FIED PERIOD.— 
(A) CORRECTION WITHIN 30 DAYS.—Sec-
tion 6721(b)(1) of such Code is amended— 
(i) by striking ‘‘$15’’ and inserting 
‘‘$50’’, 
(ii) by striking ‘‘$50’’ and inserting 
‘‘$250’’, and 
(iii) by striking ‘‘$75,000’’ and insert-
ing ‘‘$500,000’’. 
(B) FAILURES CORRECTED ON OR BEFORE 
AUGUST 1.—Section 6721(b)(2) of such Code is 
amended— 
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(i) by striking ‘‘$30’’ and inserting 
‘‘$100’’, 
(ii) by striking ‘‘$50’’ and inserting 
‘‘$250’’, and 
(iii) by striking ‘‘$150,000’’ and in-
serting ‘‘$1,500,000’’. 
(3) LOWER
LIMITATION
FOR
PERSONS
WITH 
GROSS RECEIPTS OF NOT MORE THAN $5,000,000.— 
Section 6721(d)(1) of such Code is amended— 
(A) in subparagraph (A)— 
(i) by striking ‘‘$100,000’’ and insert-
ing ‘‘$1,000,000’’, and 
(ii) by striking ‘‘$250,000’’ and in-
serting ‘‘$3,000,000’’, 
(B) in subparagraph (B)— 
(i) by striking ‘‘$25,000’’ and insert-
ing ‘‘$175,000’’, and 
(ii) by striking ‘‘$75,000’’ and insert-
ing ‘‘$500,000’’, and 
(C) in subparagraph (C)— 
(i) by striking ‘‘$50,000’’ and insert-
ing ‘‘$500,000’’, and 
(ii) by striking ‘‘$150,000’’ and in-
serting ‘‘$1,500,000’’. 
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(4) PENALTY IN CASE OF INTENTIONAL DIS-
REGARD.—Section 6721(e) of such Code is amend-
ed— 
(A) by striking ‘‘$100’’ in paragraph (2) 
and inserting ‘‘$500’’, and 
(B) by striking ‘‘$250,000’’ in paragraph 
(3)(A) and inserting ‘‘$3,000,000’’. 
(b) FAILURE TO FURNISH CORRECT PAYEE STATE-
MENTS.— 
(1) IN
GENERAL.—Section 6722(a) of such 
Code is amended— 
(A) by striking ‘‘$50’’ and inserting 
‘‘$250’’, and 
(B) by striking ‘‘$100,000’’ and inserting 
‘‘$1,000,000’’. 
(2) PENALTY IN CASE OF INTENTIONAL DIS-
REGARD.—Section 6722(c) of such Code is amend-
ed— 
(A) by striking ‘‘$100’’ in paragraph (1) 
and inserting ‘‘$500’’, and 
(B) by striking ‘‘$100,000’’ in paragraph 
(2)(A) and inserting ‘‘$1,000,000’’. 
(c) FAILURE TO COMPLY WITH OTHER INFORMA-
TION REPORTING REQUIREMENTS.—Section 6723 of such 
Code is amended— 
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(1) by striking ‘‘$50’’ and inserting ‘‘$250’’, 
and 
(2) by striking ‘‘$100,000’’ and inserting 
‘‘$1,000,000’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to information returns 
required to be filed after December 31, 2009. 
Æ 
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