April 1 of the year following such cal-
endar year.
‘‘(3) INDEPENDENT
FINANCIAL
REVIEW
RE-
QUIREMENTS.—A certified professional employer or-
ganization meets the requirements of this subpara-
graph if such organization—
‘‘(A) has, as of the most recent audit date,
caused to be prepared and provided to the Sec-
retary (in such manner as the Secretary may
prescribe) an opinion of an independent cer-
tified public accountant as to whether the cer-
tified professional employer organization’s fi-
nancial statements are presented fairly in ac-
cordance with generally accepted accounting
principles, and
‘‘(B) provides to the Secretary an assertion
regarding Federal employment tax payments
and an examination level attestation on such
assertion from an independent certified public
accountant not later than the last day of the
second month beginning after the end of each
calendar quarter. Such assertion shall state
that the organization has withheld and made
deposits of all taxes imposed by chapters 21,
22, and 24 of the Internal Revenue Code in ac-
cordance with regulations imposed by the Sec-
retary for such calendar quarter and such ex-
amination level attestation shall state that such
assertion is fairly stated, in all material re-
spects.
‘‘(4) SPECIAL
RULE
FOR
SMALL
CERTIFIED
PROFESSIONAL
EMPLOYER
ORGANIZATIONS.—The
requirements of paragraph (3)(A) shall not apply
with respect to a fiscal year of an organization if
such organization’s liability for taxes imposed by
subtitle C during the calendar year ending on (or
concurrent with) the end of the fiscal year were
$5,000,000 or less.
‘‘(5) FAILURE TO FILE ASSERTION AND ATTES-
TATION.—If the certified professional employer orga-
nization fails to file the assertion and attestation re-
quired by paragraph (3) with respect to a particular
quarter, then the requirements of paragraph (3)
with respect to such failure shall be treated as not
satisfied for the period beginning on the due date for
such attestation.
‘‘(6) AUDIT DATE.—For purposes of paragraph
(3)(A), the audit date shall be six months after the
completion of the organization’s fiscal year.
‘‘(d) SUSPENSION AND REVOCATION AUTHORITY.—
The Secretary may suspend or revoke a certification of
any person under subsection (b) for purposes of section
414(w) or 3511, or both, if the Secretary determines that
such person is not satisfying the representations or re-
quirements of subsections (b) or (c), or fails to satisfy ap-
plicable accounting, reporting, payment, or deposit re-
quirements.
‘‘(e) WORK SITE EMPLOYEE.—For purposes of this
title—
‘‘(1) IN GENERAL.—The term ‘work site em-
ployee’ means, with respect to a certified profes-
sional employer organization, an individual who—
‘‘(A) performs services for a customer pur-
suant to a contract which is between such cus-
tomer and the certified professional employer
organization and which meets the requirements
of paragraph (2), and
‘‘(B) performs services at a work site
meeting the requirements of paragraph (3).
‘‘(2) SERVICE
CONTRACT
REQUIREMENTS.—A
contract meets the requirements of this paragraph
with respect to an individual performing services for
a customer if such contract is in writing and pro-
vides that the certified professional employer organi-
zation shall—
‘‘(A) assume responsibility for payment of
wages to the individual, without regard to the
receipt or adequacy of payment from the cus-
tomer for such services,
‘‘(B) assume responsibility for reporting,
withholding, and paying any applicable taxes
under subtitle C, with respect to the individ-
ual’s wages, without regard to the receipt or
adequacy of payment from the customer for
such services,
‘‘(C) assume responsibility for any em-
ployee benefits which the service contract may
require the certified professional employer orga-
nization to provide, without regard to the re-
ceipt or adequacy of payment from the cus-
tomer for such services,
‘‘(D) assume shared responsibility with the
customer for firing the individual and for re-
cruiting and hiring any new worker,
‘‘(E) maintain employee records relating to
the individual, and
‘‘(F) agree to be treated as a certified pro-
fessional employer organization for purposes of
sections 414(w) and 3511 with respect to such
individual.
‘‘(3) WORK SITE COVERAGE REQUIREMENT.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to an indi-
vidual if at least 85 percent of the individuals
performing services for the customer at the
work site where such individual performs serv-
ices are subject to 1 or more contracts with the
certified professional employer organization
which meet the requirements of paragraph (2).
‘‘(B) SPECIAL
RULES.—For purposes of
subparagraph (A)—
‘‘(i) WORK
SITE.—The term ‘work
site’ means a physical location at which an
individual generally performs service for
the customer or, if there is no such loca-
tion, the location from which the individual
receives job assignments from the cus-
tomer.
‘‘(ii) CONTIGUOUS
LOCATIONS.—For
purposes of clause (i), work sites which are
contiguous locations shall be treated as a
single physical location.
‘‘(iii) NONCONTIGUOUS LOCATIONS.—
For purposes of clause (i), noncontiguous
locations shall be treated as separate work
sites, except that each work site within a
reasonably proximate area must satisfy the
85 percent test under subparagraph (A)
for the individuals performing services for
the customer at such work site. In deter-
mining whether noncontiguous locations
are reasonably proximate, all facts and cir-
cumstances shall be taken into account.
‘‘(iv) WORK SITES 35 MILES OR MORE
APART.—Any work site which is separated
from all other customer work sites by at
least 35 miles shall not be treated as rea-
sonably proximate under clause (iii).
‘‘(v) DIFFERENT INDUSTRY.—A work
site shall not be treated as reasonably
proximate to another work site under
clause (iii) if the work site operates in a
different industry or industries from such
other work site as determined by the Sec-
retary.
‘‘(f) EMPLOYER AGGREGATION RULES.—
‘‘(1) IN
GENERAL.—For purposes of sub-
sections (c)(2)(B)(ii), (c)(4) and (e), all persons
treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as 1
person.
‘‘(2) PLANS
MAINTAINED
BY
COMPANIES
IN
SAME CONTROLLED GROUP AS CERTIFIED PROFES-
SIONAL
EMPLOYER
ORGANIZATION.—For purposes
of subsection (b)(4), if certified professional em-
ployer organizations are part of a controlled group,
then the certified professional employer organiza-
tions (but no other member of the controlled group)
shall be treated as 1 person.
‘‘(3) QUALIFIED PLANS.—For purposes of sub-
section (b)(4)—
‘‘(A) a qualified plan (as defined in section
408(p)(2)(D)(ii)) which is maintained by, or an
arrangement to provide a simple retirement ac-
count (within the meaning of section 408(p))
to, a customer with respect to a work site em-
ployee performing services for such customer
shall be treated as if it were maintained by the
applicant, and
‘‘(B) work site employees who do not meet
the minimum age and service requirements of
section 410(a)(1)(A) (or who are excludable
from consideration under section 410(b)(3))
shall not be taken into account.
‘‘(g) DETERMINATION OF EMPLOYMENT STATUS.—
Except to the extent necessary for purposes of section
414(w) or 3511, nothing in this section shall be construed
to affect the determination of who is an employee or em-
ployer for purposes of this title.
‘‘(h) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section and sections 414(w)
and 6503(k).’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 45(B) of such Code (relating to
credit for portion of employer social security taxes
paid with respect to employees with cash tips) is
amended by adding at the end the following new
subsection:
‘‘(e) CERTIFIED PROFESSIONAL EMPLOYER ORGANI-
ZATIONS.—For purposes of this section, in the case of a
certified professional employer organization that is treat-
ed, under section 3511, as the employer of a worksite em-
ployee who is a tipped employee, the credit determined
under this section does not apply to such organization, but
does apply to the customer of such organization. For this
purpose the customer shall take into account any remu-
neration and taxes remitted by the certified professional
employer organization.’’.
(2) Section 707 of such Code is amended by
adding at the end the following new subsection:
‘‘(d) PAYMENTS TO CERTIFIED PROFESSIONAL EM-
PLOYER ORGANIZATIONS.—If a partnership that is a cus-
tomer of a certified professional employer organization (as
defined in section 7705) makes a payment to such an or-
ganization on behalf of a partner, and the payment, if
made directly to the partner, would be treated as a guar-
anteed payment under section 707(c), the partnership
shall treat the payment as if it were a guaranteed payment
made to a partner. To the extent that the relevant partner
receives all or any portion of such a payment, such partner
shall be treated as receiving a guaranteed payment for
services under section 707(c).’’.
(3) Section 3302 of such Code is amended by
adding at the end the following new subsection:
‘‘(h) TREATMENT OF CERTIFIED PROFESSIONAL EM-
PLOYER ORGANIZATIONS.—If a certified professional em-
ployer organization (as defined in section 7705) (or a cli-
ent of such organization) makes a payment to the State’s
unemployment fund with respect to a work site employee,
such organization shall be eligible for the credits available
under this section with respect to such payment.’’.
(4) Section 3303(a) of such Code is amended—
(A) by inserting ‘and’ at the end of para-
graph (3),
(B) by inserting immediately after para-
graph (3) the following new paragraph:
‘‘(4) a certified professional employer organiza-
tion (as defined in section 7705) is permitted to col-
lect and remit, in accordance with paragraphs (1),
(2), and (3), contributions during the taxable year
to the State unemployment fund with respect to a
work site employee.’’, and
(C) in the last sentence—
(i) by striking ‘‘paragraphs (1), (2),
and (3)’’ and inserting ‘‘paragraphs (1),
(2), (3), and (4)’’, and
(ii) by striking ‘‘paragraph (1), (2), or
(3)’’ and inserting ‘‘paragraph (1), (2),
(3), or (4)’’.
(5) Section 6053 of such Code (relating to re-
porting of tips) is amended by adding at the end of
subsection (c) the following new paragraph:
‘‘(8) CERTIFIED PROFESSIONAL EMPLOYER OR-
GANIZATIONS.—For purposes of any report required
by this section, in the case of a certified professional
employer organization that is treated, under section
3511, as the employer of a worksite employee, the
customer with respect to whom a worksite employee
performs services shall be the employer for purposes
of reporting under this section and the certified pro-
fessional employer organization shall furnish to the
customer any information necessary to complete
such reporting no later than such time as the Sec-
retary shall prescribe.’’.
(e) CLERICAL AMENDMENTS.—
(1) The table of sections for chapter 25 of such
Code is amended by adding at the end the following
new item:
‘‘Sec. 3511. Certified professional employer organizations.’’.
(2) The table of sections for chapter 79 of such
Code is amended by inserting after the item relating
to section 7704 the following new item:
‘‘Sec. 7705. Certified professional employer organizations.’’.
(f) 
REPORTING
REQUIREMENTS
AND
OBLIGA-
TIONS.—The Secretary of the Treasury shall develop such
reporting and recordkeeping rules, regulations, and proce-
dures as the Secretary determines necessary or appro-
priate to ensure compliance with the amendments made
by this Act with respect to entities applying for certifi-
cation as certified professional employer organizations or
entities that have been so certified. Such rules shall be
designed in a manner which streamlines, to the extent pos-
sible, the application of requirements of such amendments,
the exchange of information between a certified profes-
sional employer organization and its customers, and the
reporting and recordkeeping obligations of the certified
professional employer organization.
(g) USER FEES.—Subsection (b) of section 10511 of
the Revenue Act of 1987 (relating to fees for requests for
ruling, determination, and similar letters) is amended by
adding at the end thereof the following new paragraph:
‘‘(4) CERTIFIED PROFESSIONAL EMPLOYER OR-
GANIZATIONS.—The fee charged under the program
in connection with the certification by the Secretary
of a professional employer organization under sec-
tion 7705 of the Internal Revenue Code of 1986
shall not exceed $500.’’.
(h) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this Act shall take effect on the later of—
(A) January 1, 2005, or
(B) the January 1st of the first calendar
year beginning more than 12 months after the
date of the enactment of this Act.
(2) CERTIFICATION PROGRAM.—The Secretary
of the Treasury shall establish the certification pro-
gram described in section 7705(b) of the Internal
Revenue Code of 1986 not later than 3 months be-
fore the effective date determined under paragraph
(1).
(3) TRANSITION ISSUES.—For years beginning
before the effective date specified in paragraph (1),
subject to such conditions as the Secretary of the
Treasury may prescribe, employee benefit plans in
existence on the date of the enactment of this Act
shall not be treated as failing to meet the require-
ments of the Internal Revenue Code of 1986 merely
because such plans were maintained by an organiza-
tion prior to such organization becoming a certified
professional employer organization (as defined by
section 7705 of such Code (as added by subsection
(c) of this section)).
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