I
106TH CONGRESS
1ST SESSION
H. R. 1921
To provide that the provision of the Fair Labor Standards Act of 1938
on the accounting of tips in determining the wage of tipped employees
shall preempt any State or local provision precluding a tip credit or
requiring a tip credit less than the tip credit provided under such Act
and to amend the Internal Revenue Code of 1986 to provide that tips
received for certain services shall not be subject to income or employment
taxes.
IN THE HOUSE OF REPRESENTATIVES
MAY 25, 1999
Mr. BILBRAY (for himself and Mr. MCKEON, Mr. CAMPBELL, Mr. COX, and
Mr. EHRLICH) introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Education and the Workforce, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
A BILL
To provide that the provision of the Fair Labor Standards
Act of 1938 on the accounting of tips in determining
the wage of tipped employees shall preempt any State
or local provision precluding a tip credit or requiring
a tip credit less than the tip credit provided under such
Act and to amend the Internal Revenue Code of 1986
to provide that tips received for certain services shall
not be subject to income or employment taxes.
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 ‘‘Tip Credit Protection
Act of 1999’’.
SEC. 2. PREEMPTION.
Section 18 of the Fair Labor Standards Act of 1938
(29 U.S.C. 218) is amended by adding at the end the fol-
lowing:
‘‘(c) No law, ordinance, regulation, or order estab-
lished or enforced by a State or political subdivision of
a State shall—
‘‘(1) preclude a tip credit, or
‘‘(2) prohibit an employer from applying a tip
credit,
as authorized by section 3(m) if the employer pays cash
wages to tipped employees that are not less than the min-
imum cash wage required by such law, ordinance, regula-
tion, or order of a State or political subdivision of a State
on the date of the enactment of this subsection.’’.
SEC. 3. TIPS RECEIVED FOR CERTAIN SERVICES NOT SUB-
JECT TO INCOME OR EMPLOYMENT TAXES.
(a) IN GENERAL.—Section 102 of the Internal Rev-
enue Code of 1986 (relating to gifts and inheritances) is
amended by adding at the end the following new sub-
section:
‘‘(d) TIPS RECEIVED FOR CERTAIN SERVICES.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), tips received by an individual for qualified serv-
ices performed by such individual shall be treated as
property transferred by gift.
‘‘(2) QUALIFIED
SERVICES.—For purposes of
this subsection, the term ‘qualified services’ means
cosmetology, hospitality (including lodging and food
and beverage services), recreation, taxi, newspaper
deliveries and shoe shine services.
‘‘(3) ANNUAL
LIMIT.—The amount excluded
from gross income for the taxable year by reason of
paragraph (1) with respect to each service provider
shall not exceed $10,000.
‘‘(4) EMPLOYEE TAXABLE ON AT LEAST MIN-
IMUM WAGE.—Paragraph (1) shall not apply to tips
received by an employee during any month to the ex-
tent that such tips—
‘‘(A) are deemed to have been paid by the
employer to the employee pursuant to section
3121(q) (without regard to whether such tips
are reported under section 6053), and
‘‘(B) do not exceed the excess of—
‘‘(i) the minimum wage rate applica-
ble to such individual under section 6(a)(1)
of the Fair Labor Standards Act of 1938
(determined without regard to section 3(m)
of such Act), over
‘‘(ii) the amount of the wages (exclud-
ing tips) paid by the employer to the em-
ployee during such month.
‘‘(5) TIPS.—For purposes of this title, the term
‘tips’ means a gratuity paid by an individual for
services performed for such individual (or for a
group which includes such individual) by another in-
dividual if such services are not provided pursuant
to an employment or similar contractual relationship
between such individuals.’’
(b) EXCLUSION FROM SOCIAL SECURITY TAXES.—
(1) Paragraph (12) of section 3121(a) of such
Code is amended to read as follows:
‘‘(12)(A) tips paid in any medium other than
cash;
‘‘(B) cash tips received by an employee in any
calendar month in the course of his employment by
an employer unless the amount of such cash tips is
$20 or more and then only to the extent includible
in gross income after the application of section
102(d);’’.
(2) Paragraph (10) of section 209(a) of the So-
cial Security Act is amended to read as follows:
‘‘(10)(A) tips paid in any medium other than
cash;
‘‘(B) cash tips received by an employee in any
calendar month in the course of his employment by
an employer unless the amount of such cash tips is
$20 or more and then only to the extent includible
in gross income after the application of section
102(d) of the Internal Revenue Code of 1986 for
such month;’’.
(3) Paragraph (3) of section 3231(e) of such
Code is amended to read as follows:
‘‘(3) Solely for purposes of the taxes imposed
by section 3201 and other provisions of this chapter
insofar as they relate to such taxes, the term ‘com-
pensation’ also includes cash tips received by an em-
ployee in any calendar month in the course of his
employment by an employer if the amount of such
cash tips is $20 or more and then only to the extent
includible in gross income after the application of
section 102(d).’’.
month which includes the date of the enactment of this
Act.
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