‘‘(i) The service provider has a signifi-
cant investment in assets or training which 
are applicable to the service performed. 
‘‘(ii) The service provider is not re-
quired to perform services exclusively for 
the service recipient or payor. 
‘‘(iii) The service provider has not 
been treated as an employee by the service 
recipient or payor during the 1-year period 
ending with the date of the commencement 
of services under the contract described in 
subsection (d). 
‘‘(iv) The service provider is not com-
pensated on a basis which is tied primarily 
to the number of hours actually worked. 
‘‘(3) ALTERNATIVE REQUIREMENTS WITH RE-
SPECT TO SALES PERSONS.—In the case of a service 
provider engaged in the trade or business of selling 
(or soliciting the sale of) goods or services, the re-
quirements of this paragraph are met with respect 
to any service provided in the ordinary course of 
such trade or business if— 
‘‘(A) the service provider is compensated 
primarily on a commission basis, and 
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‘‘(B) substantially all the compensation for 
such service is directly related to sales of goods 
or services rather than to the number of hours 
worked. 
‘‘(c) PLACE OF BUSINESS OR OWN EQUIPMENT RE-
QUIREMENT.—The requirement of this subsection is met 
with respect to any service if the service provider— 
‘‘(1) has a principal place of business, 
‘‘(2) does not provide the service primarily in 
the service recipient’s place of business, 
‘‘(3) pays a fair market rent for use of the serv-
ice recipient’s place of business, or 
‘‘(4) provides the service primarily using equip-
ment supplied by the service provider. 
‘‘(d) WRITTEN CONTRACT REQUIREMENT.—The re-
quirements of this subsection are met with respect to any 
service if such service is performed pursuant to a written 
contract between the service provider and the service re-
cipient (or payor) which meets the following requirements: 
‘‘(1) The contract includes each of the fol-
lowing: 
‘‘(A) The service provider’s name, taxpayer 
identification number, and address. 
‘‘(B) A statement that the service provider 
will not be treated as an employee with respect 
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to the services provided pursuant to the con-
tract for purposes of this title. 
‘‘(C) A statement that the service recipient 
(or the payor) will withhold upon and report to 
the Internal Revenue Service the compensation 
payable pursuant to the contract consistent 
with the requirements of this title. 
‘‘(D) A statement that the service provider 
is responsible for payment of Federal, State, 
and local taxes, including self-employment 
taxes, on compensation payable pursuant to the 
contract. 
‘‘(E) A statement that the contract is in-
tended to be considered a contract described in 
this subsection. 
‘‘(2) The term of the contract does not exceed 
2 years. The preceding sentence shall not prevent 
one or more subsequent written renewals of the con-
tract from satisfying the requirements of this sub-
section if the term of each such renewal does not ex-
ceed 2 years and if the information required under 
paragraph (1)(A) is updated in connection with each 
such renewal. 
‘‘(3) The contract (or renewal) is signed (which 
may include signatures in electronic form) by both 
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the service recipient (or payor) and the service pro-
vider not later than the date on which the aggregate 
payments made by the service recipient (or payor) to 
the service provider exceeds $1,000 for the year cov-
ered by the contract (or renewal). 
‘‘(e) REPORTING REQUIREMENTS.— 
‘‘(1) IN
GENERAL.—For purposes of making 
any determination with respect to the liability of a 
service recipient or payor for any tax during any 
taxable year with respect to a service provider, the 
application of this section shall be conditioned on ei-
ther the service recipient or the payor satisfying the 
reporting requirements applicable to such service re-
cipient or payor under section 6041(a), 6041A(a), or 
6050W with respect to such service provider for 
such period. 
‘‘(2) REASONABLE
CAUSE.—For purposes of 
paragraph (1), such reporting requirements shall be 
treated as met if the failure to satisfy such require-
ments is due to reasonable cause and not willful ne-
glect. 
‘‘(f) EXCEPTION
FOR
SERVICES
PROVIDED
BY 
OWNER.—This section shall not apply with respect to any 
service provided by a service provider to a service recipient 
if the service provider owns any interest in the service re-
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cipient or any payor with respect to the service provided. 
The preceding sentence shall not apply in the case of a 
service recipient the stock of which is regularly traded on 
an established securities market. 
‘‘(g) EXCEPTION FOR PERSONAL SERVICES.— 
‘‘(1) IN GENERAL.—This section shall not apply 
with respect to any service provided for the personal 
purposes of the service recipient. 
‘‘(2) LIMITATION.—Paragraph (1) shall not 
apply in the case of any services provided to a serv-
ice recipient who is not the payor. 
‘‘(h) LIMITATION
ON RECLASSIFICATION
BY SEC-
RETARY.—For purposes of this title— 
‘‘(1) EFFECT OF RECLASSIFICATION ON SERV-
ICE RECIPIENTS AND PAYORS.—A determination by 
the Secretary that a service recipient or a payor 
should have treated a service provider as an em-
ployee shall be effective with respect to the service 
recipient or payor no earlier than the notice date 
if— 
‘‘(A) the service recipient or the payor en-
tered into a written contract with the service 
provider which meets the requirements of sub-
section (d), 
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‘‘(B) the service recipient or the payor sat-
isfied the applicable reporting requirements of 
section 6041(a), 6041A(a), or 6050W for all 
relevant taxable years with respect to the serv-
ice provider, 
‘‘(C) the service recipient or the payor col-
lected and paid over all applicable taxes im-
posed under subtitle C for all relevant taxable 
years with respect to the service provider, and 
‘‘(D) the service recipient or the payor 
demonstrates a reasonable basis for having de-
termined that the service provider should not be 
treated as an employee under this section and 
that such determination was made in good 
faith. 
‘‘(2) EFFECT OF RECLASSIFICATION ON SERV-
ICE PROVIDERS.—A determination by the Secretary 
that a service provider should have been treated as 
an employee shall be effective with respect to the 
service provider no earlier than the notice date if— 
‘‘(A) the service provider entered into a 
written contract with the service recipient or 
payor which meets the requirements of sub-
section (d), 
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‘‘(B) the service provider satisfied the ap-
plicable reporting requirements of sections 
6012(a) and 6017 for all relevant taxable years 
with respect to the service recipient or payor, 
and 
‘‘(C) the service provider demonstrates a 
reasonable basis for determining that the serv-
ice provider is not an employee under this sec-
tion and that such determination was made in 
good faith. 
‘‘(3) NOTICE DATE.—For purposes of this sub-
section, the term ‘notice date’ means the 30th day 
after the earliest of— 
‘‘(A) the date on which the first letter of 
proposed deficiency which allows the service 
provider, the service recipient, or the payor an 
opportunity for administrative review in the In-
ternal Revenue Service Office of Appeals is 
sent, 
‘‘(B) the date on which a deficiency notice 
under section 6212 is sent, or 
‘‘(C) the date on which a notice of deter-
mination under section 7436(b)(2) is sent. 
‘‘(4) REASONABLE CAUSE EXCEPTION.—The re-
quirements of paragraphs (1)(B) and (2)(B) shall be 
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treated as met if the failure to satisfy such require-
ments is due to reasonable cause and not willful ne-
glect. 
‘‘(5) NO RESTRICTION ON ADMINISTRATIVE OR 
JUDICIAL REVIEW.—Nothing in this subsection shall 
be construed as limiting any provision of law which 
provides an opportunity for administrative or judi-
cial review of a determination by the Secretary. 
‘‘(i) RULE OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed as— 
‘‘(1) limiting the ability or right of a service 
provider, service recipient, or payor to apply any 
other provision of this title, section 530 of the Rev-
enue Act of 1978, or any common law rules for de-
termining whether an individual is an employee, or 
‘‘(2) establishing a prerequisite for the applica-
tion of any provision of law described in paragraph 
(1). 
‘‘(j) DEFINITIONS.—For purposes of this section— 
‘‘(1) SERVICE PROVIDER.— 
‘‘(A) IN GENERAL.—The term ‘service pro-
vider’ means any qualified person who performs 
service for another person. 
‘‘(B) 
QUALIFIED
PERSON.—The 
term 
‘qualified person’ means— 
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‘‘(i) any natural person, or 
‘‘(ii) any entity if any of the services 
referred to in subparagraph (A) are per-
formed by one or more natural persons 
who directly own interests in such entity. 
‘‘(2) SERVICE RECIPIENT.—The term ‘service 
recipient’ means the person for whom the service 
provider performs such service. 
‘‘(3) PAYOR.—The term ‘payor’ means— 
‘‘(A) any person, including the service re-
cipient, who pays the service provider for per-
forming such service, or 
‘‘(B) any third party settlement organiza-
tion, as defined in section 6050W(b)(3). 
‘‘(k) 
REGULATIONS.—Notwithstanding 
section 
530(d) of the Revenue Act of 1978, the Secretary shall 
issue such regulations as the Secretary determines are 
necessary to carry out the purposes of this section.’’. 
(b) WITHHOLDING BY PAYOR IN CASE OF CERTAIN 
PERSONS CLASSIFIED
AS NOT EMPLOYEES.—Section 
3402 of the Internal Revenue Code of 1986 is amended 
by redesignating subsection (s) as subsection (t) and in-
serting after subsection (r) the following new subsection: 
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‘‘(s) EXTENSION OF WITHHOLDING TO PAYMENTS 
TO CERTAIN PERSONS CLASSIFIED
AS NOT EMPLOY-
EES.— 
‘‘(1) IN GENERAL.—For purposes of this chap-
ter and so much of subtitle F as relates to this chap-
ter, compensation paid pursuant to a contract de-
scribed in section 7706(d) shall be treated as if it 
were a payment of wages by an employer to an em-
ployee. 
‘‘(2) AMOUNT WITHHELD.—Except as otherwise 
provided under subsection (i), the amount to be de-
ducted and withheld pursuant to paragraph (1) with 
respect to compensation paid pursuant to any such 
contract during any calendar year shall be an 
amount equal to 5 percent of so much of the amount 
of such compensation as does not exceed $20,000.’’. 
(c) DIRECT
SELLERS
OF
PROMOTIONAL
PROD-
UCTS.—Subsection (b) of section 3508 is amended— 
(1) in paragraph (2)(A)— 
(A) in clause (ii), by striking ‘‘or’’ at the 
end; 
(B) in clause (iii), by adding ‘‘or’’ at the 
end; and 
(C) by inserting after clause (iii) the fol-
lowing new clause: 
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‘‘(iv) is engaged in the trade or busi-
ness of selling, or soliciting the sale of, 
promotional products from other than a 
permanent retail establishment,’’; 
(2) by redesignating paragraph (3) as para-
graph (4); and 
(3) by inserting after paragraph (2) the fol-
lowing new paragraph: 
‘‘(3) PROMOTIONAL
PRODUCT.—For purposes 
of paragraph (2)(A)(iv), the term ‘promotional prod-
uct’ means a tangible item with permanently marked 
promotional words, symbols, or art of the pur-
chaser.’’. 
(d) REPORTING.— 
(1) INFORMATION AT SOURCE.—Section 6041 
of the Internal Revenue Code of 1986 is amended— 
(A) in subsection (a)— 
(i) in the heading, by striking ‘‘$600’’ 
and inserting ‘‘$1,000’’; and 
(ii) by striking ‘‘$600 or more in any 
taxable year’’ and inserting ‘‘$1,000 or 
more in any taxable year’’; and 
(B) by adding at the end the following new 
subsection: 
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‘‘(h) SPECIAL RULES FOR CERTAIN PERSONS CLAS-
SIFIED AS NOT EMPLOYEES.— 
‘‘(1) IN GENERAL.—In the case of any service 
recipient or payor required to make a return under 
subsection (a) with respect to compensation to which 
section 7706(a) applies— 
‘‘(A) such return shall include— 
‘‘(i) the aggregate amount of such 
compensation paid to each person whose 
name is required to be included on such re-
turn, 
‘‘(ii) the aggregate amount deducted 
and withheld under section 3402(s) with 
respect to such compensation, and 
‘‘(iii) an indication of whether a copy 
of the contract described in section 
7706(d) is on file with the service recipient 
or payor, and 
‘‘(B) the statement required to be fur-
nished under subsection (d) shall include the in-
formation described in subparagraph (A) with 
respect to the service provider to whom such 
statement is furnished. 
‘‘(2) DEFINITIONS.—Terms used in this sub-
section which are also used in section 7706 shall 
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have the same meaning as when used in such sec-
tion.’’. 
(2) RETURNS REGARDING PAYMENTS OF REMU-
NERATION FOR SERVICES AND DIRECT SALES.—Sec-
tion 6041A of such Code is amended— 
(A) in paragraph (2) of subsection (a), by 
striking ‘‘$600’’ and inserting ‘‘$1,000’’; and 
(B) by adding at the end the following new 
subsection: 
‘‘(g) SPECIAL RULES FOR CERTAIN PERSONS CLAS-
SIFIED AS NOT EMPLOYEES.—Rules similar to the rules 
of subsection (h) of section 6041 shall apply for purposes 
of this section.’’. 
(3) RETURNS RELATING TO PAYMENTS MADE 
IN
SETTLEMENT
OF
PAYMENT
CARD
AND
THIRD 
PARTY
NETWORK
TRANSACTIONS.—Section 6050W 
of such Code is amended— 
(A) in subsection (d), by amending para-
graph (3) to read as follows: 
‘‘(3) THIRD PARTY NETWORK.— 
‘‘(A) IN GENERAL.—The term ‘third party 
payment network’ means any agreement or ar-
rangement— 
‘‘(i) which involves the establishment 
of accounts with a central organization or 
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marketplace platform by a substantial 
number of persons who— 
‘‘(I) are unrelated to such organi-
zation or platform, 
‘‘(II) provide goods or services, 
and 
‘‘(III) have agreed to settle 
transactions for the provision of such 
goods or services pursuant to such 
agreement or arrangement, 
‘‘(ii) which provides for standards and 
mechanisms for settling such transactions, 
and 
‘‘(iii) which guarantees persons pro-
viding goods or services pursuant to such 
agreement or arrangement that such per-
sons will be paid for providing such goods 
or services. 
‘‘(B) EXCEPTION.—The term ‘third party 
payment network’ shall not include any agree-
ment or arrangement which provides for the 
issuance of payment cards. 
‘‘(C) MARKETPLACE PLATFORM.—For pur-
poses of subparagraph (A), the term ‘market-
place platform’ means any person who— 
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‘‘(i) operates a digital website or mo-
bile application that facilitates the provi-
sion of goods or services by providers to re-
cipients, 
‘‘(ii) enters into an agreement with 
each provider stating that such provider 
will not be treated as an employee with re-
spect to such goods or services, 
‘‘(iii) provides standards and mecha-
nisms for settling such facilitated trans-
actions, and 
‘‘(iv) guarantees each provider of 
goods or services pursuant to such agree-
ment that the provider will be paid for 
such facilitated transaction.’’; 
(B) by amending subsection (e) to read as 
follows: 
‘‘(e) EXCEPTION FOR DE MINIMIS PAYMENTS BY 
THIRD PARTY SETTLEMENT ORGANIZATIONS.— 
‘‘(1) IN GENERAL.—A third party settlement 
organization shall be required to report any informa-
tion under subsection (a) with respect to third party 
network transactions of any participating payee only 
if the amount which would otherwise be reported 
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under subsection (a)(2) with respect to such trans-
actions exceeds $1,000. 
‘‘(2) ELECTION TO REPORT.—Notwithstanding 
paragraph (1), a third party settlement organization 
may elect to report any information under sub-
section (a) with respect to third party network 
transactions of any participating payee for which the 
amount reported under subsection (a)(2) with re-
spect to such transactions is equal to or less than 
$1,000.’’; and 
(C) in subsection (f)— 
(i) in paragraph (1), by striking 
‘‘and’’ at the end; 
(ii) in paragraph (2), by striking the 
period at the end and inserting ‘‘, and’’; 
and 
(iii) by inserting after paragraph (2) 
the following new paragraph: 
‘‘(3) the amount, if any, withheld pursuant to 
section 3402(s).’’. 
(e) PROCEEDINGS FOR DETERMINATION OF EMPLOY-
MENT STATUS.—Paragraph (1) of section 7436(b) of the 
Internal Revenue Code of 1986 is amended to read as fol-
lows: 
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‘‘(1) PETITIONER.—A pleading may be filed 
under this section only by— 
‘‘(A) the person for whom the services are 
performed, or 
‘‘(B) any service provider (as defined in 
section 7706(j)(1)) which the Secretary has de-
termined should have been treated as an em-
ployee.’’. 
(f) CLERICAL AMENDMENT.—The table of sections 
for chapter 79 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item: 
‘‘Sec. 7706. Determination of worker classification.’’. 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to services performed after Decem-
ber 31, 2017 (and to payments made for such services 
after such date). 
Æ 
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