Title: NEW GIG Act of 2017
Policy area: Taxation

Summary:
New Economy Works to Guarantee Independence and Growth Act of 2017 or the NEW GIG Act of 2017
This bill amends the Internal Revenue Code to establish a test for determining if a service provider should be classified as an independent contractor rather than as an employee for tax purposes.
If the requirements of the test are met, the provider may not be treated as an employee, the recipient or any payor may not be treated as an employer, and compensation for the service may not be treated as paid or received with respect to employment.
The factors of the test include:
The bill also: (1) sets forth withholding and reporting requirements for service recipients who meet the requirements of the test, and (2) allows service providers to petition the U.S. Tax Court for a determination of employment status.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 1549 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  1st Session
                                S. 1549

To amend the Internal Revenue Code of 1986 to provide a safe harbor for 
     determinations of worker classification, to require increased 
                   reporting, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 13, 2017

   Mr. Thune introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide a safe harbor for 
     determinations of worker classification, to require increased 
                   reporting, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``New Economy Works to Guarantee 
Independence and Growth Act of 2017'' or the ``NEW GIG Act of 2017''.

SEC. 2. DETERMINATION OF WORKER CLASSIFICATION.

    (a) In General.--Chapter 79 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new section:

``SEC. 7706. DETERMINATION OF WORKER CLASSIFICATION.

    ``(a) In General.--For purposes of this title (and notwithstanding 
any provision of this title not contained in this section to the 
contrary), if the requirements of subsections (b), (c), and (d) are met 
with respect to any service performed by a service provider, then with 
respect to such service--
            ``(1) the service provider shall not be treated as an 
        employee,
            ``(2) the service recipient shall not be treated as an 
        employer,
            ``(3) any payor shall not be treated as an employer, and
            ``(4) the compensation paid or received for such service 
        shall not be treated as paid or received with respect to 
        employment.
    ``(b) General Service Provider Requirements.--
            ``(1) In general.--The requirements of this subsection are 
        met with respect to any service if the service provider 
        either--
                    ``(A) meets the requirements of paragraph (2) with 
                respect to such service, or
                    ``(B) in the case of a service provider engaged in 
                the trade or business of selling (or soliciting the 
                sale of) goods or services, meets the requirements of 
                paragraph (3) with respect to such service.
            ``(2) General requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any service if the 
                service provider, in connection with performing the 
                service--
                            ``(i) incurs expenses--
                                    ``(I) which are deductible under 
                                section 162, and
                                    ``(II) a significant portion of 
                                which are not reimbursed,
                            ``(ii) agrees to perform the service for a 
                        particular amount of time, to achieve a 
                        specific result, or to complete a specific 
                        task, and
                            ``(iii) satisfies not less than one of the 
                        factors described in subparagraph (B).
                    ``(B) Factors.--The factors described in this 
                subparagraph are the following:
                            ``(i) The service provider has a 
                        significant investment in assets or training 
                        which are applicable to the service performed.
                            ``(ii) The service provider is not required 
                        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 
                        compensated on a basis which is tied primarily 
                        to the number of hours actually worked.
            ``(3) Alternative requirements with respect 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 requirements 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
                    ``(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 Requirement.--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 service 
        recipient's place of business, or
            ``(4) provides the service primarily using equipment 
        supplied by the service provider.
    ``(d) Written Contract Requirement.--The requirements 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 recipient (or payor) which meets the following 
requirements:
            ``(1) The contract includes each of the following:
                    ``(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 to the 
                services provided pursuant to the contract 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 intended 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 contract from satisfying the 
        requirements of this subsection if the term of each such 
        renewal does not exceed 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 the service 
        recipient (or payor) and the service provider 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 covered 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 either the service recipient or the payor satisfying the 
        reporting requirements applicable to such service recipient 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 requirements is due to reasonable cause 
        and not willful neglect.
    ``(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 recipient 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 service recipient who is not 
        the payor.
    ``(h) Limitation on Reclassification by Secretary.--For purposes of 
this title--
            ``(1) Effect of reclassification on service recipients and 
        payors.--A determination by the Secretary that a service 
        recipient or a payor should have treated a service provider as 
        an employee 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 entered 
                into a written contract with the service provider which 
                meets the requirements of subsection (d),
                    ``(B) the service recipient or the payor satisfied 
                the applicable reporting requirements of section 
                6041(a), 6041A(a), or 6050W for all relevant taxable 
                years with respect to the service provider,
                    ``(C) the service recipient or the payor collected 
                and paid over all applicable taxes imposed 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 determined 
                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 service 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 subsection (d),
                    ``(B) the service provider satisfied the applicable 
                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 service 
                provider is not an employee under this section and that 
                such determination was made in good faith.
            ``(3) Notice date.--For purposes of this subsection, 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 Internal 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 determination 
                under section 7436(b)(2) is sent.
            ``(4) Reasonable cause exception.--The requirements of 
        paragraphs (1)(B) and (2)(B) shall be treated as met if the 
        failure to satisfy such requirements is due to reasonable cause 
        and not willful neglect.
            ``(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 judicial review of a determination by the 
        Secretary.
    ``(i) Rule of Construction.--Nothing in this section 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 Revenue Act of 1978, or any 
        common law rules for determining whether an individual is an 
        employee, or
            ``(2) establishing a prerequisite for the application 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 provider' 
                means any qualified person who performs service for 
                another person.
                    ``(B) Qualified person.--The term `qualified 
                person' means--
                            ``(i) any natural person, or
                            ``(ii) any entity if any of the services 
                        referred to in subparagraph (A) are performed 
                        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 recipient, 
                who pays the service provider for performing such 
                service, or
                    ``(B) any third party settlement organization, 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 inserting 
after subsection (r) the following new subsection:
    ``(s) Extension of Withholding to Payments to Certain Persons 
Classified as Not Employees.--
            ``(1) In general.--For purposes of this chapter and so much 
        of subtitle F as relates to this chapter, compensation paid 
        pursuant to a contract described in section 7706(d) shall be 
        treated as if it were a payment of wages by an employer to an 
        employee.
            ``(2) Amount withheld.--Except as otherwise provided under 
        subsection (i), the amount to be deducted 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 Products.--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 following 
                new clause:
                            ``(iv) is engaged in the trade or business 
                        of selling, or soliciting the sale of, 
                        promotional products from other than a 
                        permanent retail establishment,'';
            (2) by redesignating paragraph (3) as paragraph (4); and
            (3) by inserting after paragraph (2) the following new 
        paragraph:
            ``(3) Promotional product.--For purposes of paragraph 
        (2)(A)(iv), the term `promotional product' means a tangible 
        item with permanently marked promotional words, symbols, or art 
        of the purchaser.''.
    (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:
    ``(h) Special Rules for Certain Persons Classified 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 return,
                            ``(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 furnished under 
                subsection (d) shall include the information described 
                in subparagraph (A) with respect to the service 
                provider to whom such statement is furnished.
            ``(2) Definitions.--Terms used in this subsection which are 
        also used in section 7706 shall have the same meaning as when 
        used in such section.''.
            (2) Returns regarding payments of remuneration for services 
        and direct sales.--Section 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 Classified 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 paragraph (3) to 
                read as follows:
            ``(3) Third party network.--
                    ``(A) In general.--The term `third party payment 
                network' means any agreement or arrangement--
                            ``(i) which involves the establishment of 
                        accounts with a central organization or 
                        marketplace platform by a substantial number of 
                        persons who--
                                    ``(I) are unrelated to such 
                                organization 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 providing 
                        goods or services pursuant to such agreement or 
                        arrangement that such persons will be paid for 
                        providing such goods or services.
                    ``(B) Exception.--The term `third party payment 
                network' shall not include any agreement or arrangement 
                which provides for the issuance of payment cards.
                    ``(C) Marketplace platform.--For purposes of 
                subparagraph (A), the term `marketplace platform' means 
                any person who--
                            ``(i) operates a digital website or mobile 
                        application that facilitates the provision of 
                        goods or services by providers to recipients,
                            ``(ii) enters into an agreement with each 
                        provider stating that such provider will not be 
                        treated as an employee with respect to such 
                        goods or services,
                            ``(iii) provides standards and mechanisms 
                        for settling such facilitated transactions, and
                            ``(iv) guarantees each provider of goods or 
                        services pursuant to such agreement 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 information under subsection 
        (a) with respect to third party network transactions of any 
        participating payee only if the amount which would otherwise be 
        reported under subsection (a)(2) with respect to such 
        transactions exceeds $1,000.
            ``(2) Election to report.--Notwithstanding paragraph (1), a 
        third party settlement organization may elect to report any 
        information under subsection (a) with respect to third party 
        network transactions of any participating payee for which the 
        amount reported under subsection (a)(2) with respect 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 Employment Status.--Paragraph 
(1) of section 7436(b) of the Internal Revenue Code of 1986 is amended 
to read as follows:
            ``(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 determined should 
                have been treated as an employee.''.
    (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 December 31, 2017 (and to payments 
made for such services after such date).
                                 <all>