I
106TH CONGRESS
2D SESSION
H. R. 5506
To amend the Internal Revenue Code of 1986 to expand the tip tax credit
to employers of cosmetologists and to promote tax compliance in the
cosmetology sector.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 19, 2000
Mrs. JOHNSON of Connecticut 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 expand
the tip tax credit to employers of cosmetologists and
to promote tax compliance in the cosmetology sector.
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 ‘‘Cosmetology Tax Fair-
ness and Compliance Act of 2000’’.
SEC. 2. EXPANSION OF CREDIT FOR PORTION OF SOCIAL
SECURITY TAXES PAID WITH RESPECT TO
EMPLOYEE TIPS.
(a) EXPANSION OF CREDIT TO OTHER LINES OF
BUSINESS.—Paragraph (2) of section 45B(b) of the Inter-
nal 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 cus-
tomers or clients in connection with—
‘‘(A) the providing, delivering, or serving
of food or beverages for consumption if the tip-
ping of employees delivering or serving food or
beverages by customers is customary, or
‘‘(B) the providing of any cosmetology
service for customers or clients at a facility li-
censed to provide such service if the tipping of
employees providing such service is cus-
tomary.’’.
(b) DEFINITION OF COSMETOLOGY SERVICES.—Sec-
tion 45B of such Code is amended by redesignating sub-
sections (c) and (d) as subsections (d) and (e), respec-
tively, and by inserting after subsection (b) the following
new subsection:
‘‘(c) COSMETOLOGY SERVICE.—For purposes of this
section, the term ‘cosmetology service’ means—
‘‘(1) hairdressing,
‘‘(2) haircutting,
‘‘(3) manicures and pedicures,
‘‘(4) body waxing, facials, mud packs, wraps
and other similar skin treatments, and
‘‘(5) any other beauty related service provided
at a facility at which a majority of the services pro-
vided (as determined on the basis of gross revenue)
are described in paragraphs (1) through (4).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to taxes paid after
December 31, 2000.
SEC. 3. INFORMATION REPORTING BY PROVIDERS OF COS-
METOLOGY SERVICES.
(a) IN GENERAL.—Chapter 61 of the Internal Rev-
enue Code of 1986 is amended by inserting after section
6050S the following new section:
‘‘SEC. 6050T. RETURNS RELATING TO COSMETOLOGY SERV-
ICES AND INFORMATION TO BE PROVIDED TO
COSMETOLOGISTS.
‘‘(a) IN GENERAL.—Every person who leases space
to any individual for use by the individual in providing
cosmetology services (as defined in section 45B(c)) on
more than 5 calendar days during a calendar year shall
make a return, according to the forms or regulations pre-
‘‘(d) METHOD AND TIME FOR PROVIDING STATE-
MENT
AND ADDITIONAL INFORMATION.—The written
statement required by subsection (b) and the additional
information, if any, required to be furnished under sub-
section (c) shall be furnished (either in person or in a
statement mailed by first-class mail which includes ade-
quate notice that the statement is enclosed) to the person
on or before January 31 of the year following the calendar
year for which the return under subsection (a) is to be
made. Such statement shall be in such form as the Sec-
retary may prescribe by regulations.
‘‘(e) LEASE.—For purposes of this section, the term
‘lease’ include booth rentals and any other arrangements
pursuant to which an individual provides cosmetology
services, other than as an employee, on premises not
owned by the service provider.
‘‘(f) EXCEPTION FOR SERVICES PROVIDED BY PRO-
PRIETORSHIPS WITH EMPLOYEES.—This section shall not
apply to leases of premises with at least 3 work stations
for providing cosmetology services.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 6724(d)(1)(B) of such Code (relat-
ing to the definition of information returns) is
amended—
(A) by striking ‘‘or’’ at the end of clause
(xiv),
(B) by adding a comma at the end of
clause (xv),
(C) by striking ‘‘; or’’ at the end of clause
(xvi) and inserting a comma,
(D) by striking the period at the end of
clause (xvii) and inserting ‘‘, or’’, and
(E) by inserting after clause (xvii) the fol-
lowing new clause:
‘‘(xviii) section 6050T (relating to re-
turns by cosmetology service providers).’’.
(2) Section 6724(d)(2) of such Code is
amended—
(A) by striking ‘‘or’’ at the end of subpara-
graph (Z) and inserting a comma,
(B) by striking the period at the end of
subparagraph (AA) and inserting ‘‘, or’’, and
(C) by inserting after subparagraph (AA)
the following new subparagraph:
‘‘(BB) section 6050T(c) (relating to state-
ments from cosmetology service providers) even
if the recipient is not a payee.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar years after 2000.
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