I 
113TH CONGRESS 
2D SESSION 
H. R. 5615 
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 
SEPTEMBER 18, 2014 
Mr. SAM JOHNSON of Texas 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 ‘‘Small Business Tax 
Equalization and Compliance Act of 2014’’. 
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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 SERVICE.—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— 
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‘‘(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 to tips received for services per-
formed after December 31, 2013. 
SEC. 3. INFORMATION REPORTING AND TAXPAYER EDU-
CATION FOR PROVIDERS OF COSMETOLOGY 
SERVICES. 
(a) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 of the Internal Revenue Code of 
1986 is amended by inserting after section 6050W the fol-
lowing new section: 
‘‘SEC. 6050X. RETURNS RELATING TO COSMETOLOGY SERV-
ICES AND INFORMATION TO BE PROVIDED TO 
COSMETOLOGISTS. 
‘‘(a) IN GENERAL.—Every person (referred to in this 
section as a ‘reporting person’) who— 
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‘‘(1) employs 1 or more cosmetologists to pro-
vide any cosmetology service, 
‘‘(2) rents a chair to 1 or more cosmetologists 
to provide any cosmetology service on at least 5 cal-
endar days during a calendar year, or 
‘‘(3) in connection with its trade or business or 
rental activity, otherwise receives compensation 
from, or pays compensation to, 1 or more cosmetolo-
gists for the right to provide cosmetology services to, 
or for cosmetology services provided to, third-party 
patrons, 
shall comply with the return requirements of subsection 
(b) and the taxpayer education requirements of subsection 
(c). 
‘‘(b) RETURN REQUIREMENTS.—The return require-
ments of this subsection are met by a reporting person 
if the requirements of each of the following paragraphs 
applicable to such person are met. 
‘‘(1) EMPLOYEES.—In the case of a reporting 
person who employs 1 or more cosmetologists to pro-
vide cosmetology services, the requirements of this 
paragraph are met if such person meets the require-
ments of sections 6051 (relating to receipts for em-
ployees) and 6053(b) (relating to tip reporting) with 
respect to each such employee. 
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‘‘(2) INDEPENDENT
CONTRACTORS.—In the 
case of a reporting person who pays compensation to 
1 or more cosmetologists (other than as employees) 
for cosmetology services provided to third-party pa-
trons, the requirements of this paragraph are met if 
such person meets the applicable requirements of 
section 6041 (relating to returns filed by persons 
making payments of $600 or more in the course of 
a trade or business), section 6041A (relating to re-
turns to be filed by service-recipients who pay more 
than $600 in a calendar year for services from a 
service provider), and each other provision of this 
subpart that may be applicable to such compensa-
tion. 
‘‘(3) CHAIR RENTERS.— 
‘‘(A) IN GENERAL.—In the case of a re-
porting person who receives rent or other fees 
or compensation from 1 or more cosmetologists 
for use of a chair or for rights to provide any 
cosmetology service at a salon or other similar 
facility for more than 5 days in a calendar year, 
the requirements of this paragraph are met if 
such person— 
‘‘(i) makes a return, according to the 
forms or regulations prescribed by the Sec-
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retary, setting forth the name, address, 
and TIN of each such cosmetologist and 
the amount received from each such cos-
metologist, and 
‘‘(ii) furnishes to each cosmetologist 
whose name is required to be set forth on 
such return a written statement showing— 
‘‘(I) the name, address, and 
phone number of the information con-
tact of the reporting person, 
‘‘(II) the amount received from 
such cosmetologist, and 
‘‘(III) a statement informing 
such cosmetologist that (as required 
by this section), the reporting person 
has advised the Internal Revenue 
Service that the cosmetologist pro-
vided cosmetology services during the 
calendar year to which the statement 
relates. 
‘‘(B) METHOD AND TIME FOR PROVIDING 
STATEMENT.—The written statement required 
by clause (ii) of subparagraph (A) shall be fur-
nished (either in person or by first-class mail 
which includes adequate notice that the state-
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ment or information is enclosed) to the person 
on or before January 31 of the year following 
the calendar year for which the return under 
clause (i) of subparagraph (A) is to be made. 
‘‘(c) TAXPAYER EDUCATION REQUIREMENTS.—In 
the case of a reporting person who is required to provide 
a statement pursuant to subsection (b), the requirements 
of this subsection are met if such person provides to each 
such cosmetologist annually a publication, as designated 
by the Secretary, describing— 
‘‘(1) in the case of an employee, the tax and tip 
reporting obligations of employees, and 
‘‘(2) in the case of a cosmetologist who is not 
an employee of the reporting person, the tax obliga-
tions of independent contractors or proprietorships. 
The publications shall be furnished either in person or by 
first-class mail which includes adequate notice that the 
publication is enclosed. 
‘‘(d) DEFINITIONS.—For purposes of this section— 
‘‘(1) COSMETOLOGIST.— 
‘‘(A) IN GENERAL.—The term ‘cosmetolo-
gist’ means an individual who provides any cos-
metology service. 
‘‘(B) ANTI-AVOIDANCE
RULE.—The Sec-
retary may by regulation or ruling expand the 
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term ‘cosmetologist’ to include any entity or ar-
rangement if the Secretary determines that en-
tities are being formed to circumvent the re-
porting requirements of this section. 
‘‘(2) COSMETOLOGY SERVICE.—The term ‘cos-
metology service’ has the meaning given to such 
term by section 45B(c). 
‘‘(3) CHAIR.—The term ‘chair’ includes a chair, 
booth, or other furniture or equipment from which 
an individual provides a cosmetology service (deter-
mined without regard to whether the cosmetologist 
is entitled to use a specific chair, booth, or other 
similar furniture or equipment or has an exclusive 
right to use any such chair, booth, or other similar 
furniture or equipment). 
‘‘(e) EXCEPTIONS FOR CERTAIN EMPLOYEES.—Sub-
section (c) shall not apply to a reporting person with re-
spect to an employee who is employed in a capacity for 
which tipping (or sharing tips) is not customary.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 6724(d)(1)(B) of such Code (relat-
ing to the definition of information returns) is 
amended by striking ‘‘or’’ at the end of clause 
(xxiv), by striking ‘‘and’’ at the end of clause (xxv) 
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and inserting ‘‘or’’, and by inserting after clause 
(xxv) the following new clause: 
‘‘(xvi) section 6050X(a) (relating to 
returns by cosmetology service providers), 
and’’. 
(2) Section 6724(d)(2) of such Code is amend-
ed by striking ‘‘or’’ at the end of subparagraph 
(GG), by striking the period at the end of subpara-
graph (HH) and inserting ‘‘, or’’, and by inserting 
after subparagraph (HH) the following new subpara-
graph: 
‘‘(II) subsections (b)(3)(A)(ii) and (c) of 
section 6050X (relating to cosmetology service 
providers) even if the recipient is not a payee.’’. 
(3) The table of sections for subpart B of part 
III of subchapter A of chapter 61 of such Code is 
amended by adding after the item relating to section 
6050W the following new item: 
‘‘Sec. 6050X. Returns relating to cosmetology services and information to be 
provided to cosmetologists.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years after 2013. 
Æ 
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