Title: New Illegal Deduction Elimination Act
Policy area: Taxation

Summary:
New IDEA Act or the New Illegal Deduction Elimination Act
This bill denies a tax deduction for wages and benefits paid to or on behalf of an unauthorized alien. The bill also extends to six years the period for assessing and collecting underpayments of tax due to deductions claimed for wages paid to unauthorized aliens.
The Social Security Administration (SSA), the Department of Homeland Security (DHS), and the Department of the Treasury must jointly establish a program to share information that may lead to the identification of unauthorized aliens. Treasury must provide information to DHS and the SSA regarding employers who paid nondeductible wages to unauthorized aliens and the aliens to whom such wages were paid.
The bill amends the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 to (1) make permanent the E-Verify Program for verifying the employment eligibility of alien workers, (2) apply such program to current employees in addition to new hires, (3) establish a rebuttable presumption that employers who participate in the E-Verify Program and obtain confirmation of identity and employment eligibility have not violated hiring requirements under such Act, and (4) allow employers participating in the E-Verify Program to make a conditional offer of employment pending final verification of the identity and employment eligibility of the job applicant.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 904 Introduced in House (IH)]

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116th CONGRESS
  1st Session
                                H. R. 904

 To amend the Internal Revenue Code of 1986 to clarify that wages paid 
 to unauthorized aliens may not be deducted from gross income, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 30, 2019

     Mr. King of Iowa (for himself, Mr. Duncan, Mr. Gaetz, and Mr. 
 DesJarlais) introduced the following bill; which was referred to the 
 Committee on Ways and Means, and in addition to the Committees on the 
  Judiciary, and Education and Labor, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to clarify that wages paid 
 to unauthorized aliens may not be deducted from gross income, 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--
            (1) the ``New IDEA Act''; or
            (2) the ``New Illegal Deduction Elimination Act''.

SEC. 2. CLARIFICATION THAT WAGES PAID TO UNAUTHORIZED ALIENS MAY NOT BE 
              DEDUCTED FROM GROSS INCOME.

    (a) In General.--Subsection (c) of section 162 of the Internal 
Revenue Code of 1986 (relating to illegal bribes, kickbacks, and other 
payments) is amended by adding at the end the following new paragraph:
            ``(4) Wages paid to or on behalf of unauthorized aliens.--
                    ``(A) In general.--No deduction shall be allowed 
                under subsection (a) for any wage paid to or on behalf 
                of an unauthorized alien, as defined under section 
                274A(h)(3) of the Immigration and Nationality Act (8 
                U.S.C. 1324a(h)(3)).
                    ``(B) Wages.--For the purposes of this paragraph, 
                the term `wages' means all remuneration for employment, 
                including the cash value of all remuneration (including 
                benefits) paid in any medium other than cash.
                    ``(C) Safe harbor.--If a person or other entity is 
                participating in the E-Verify Program described in 
                section 403(a) of the Illegal Immigration Reform and 
                Immigrant Responsibility Act of 1996 (8 U.S.C. 1324a 
                note) and obtains confirmation of identity and 
                employment eligibility in compliance with the terms and 
                conditions of the program with respect to the hiring 
                (or recruitment or referral) of an employee, 
                subparagraph (A) shall not apply with respect to wages 
                paid to such employee.
                    ``(D) Burden of proof.--In the case of any 
                examination of a return in connection with a deduction 
                under this section by reason of this paragraph, the 
                Secretary shall bear the burden of proving that wages 
                were paid to or on behalf of an unauthorized alien.
                    ``(E) Limitation on taxpayer audit.--The Secretary 
                may not commence an audit or other investigation of a 
                taxpayer solely on the basis of a deduction taken under 
                this section by reason of this paragraph.''.
    (b) Six-Year Limitation on Assessment and Collection.--Subsection 
(c) of section 6501 of the Internal Revenue Code of 1986 (relating to 
exceptions) is amended by adding at the end the following new 
paragraph:
            ``(12) Deduction claimed for wages paid to unauthorized 
        aliens.--In the case of a return of tax on which a deduction is 
        shown in violation of section 162(c)(4), any tax under chapter 
        1 may be assessed, or a proceeding in court for the collection 
        of such tax may be begun without assessment, at any time within 
        6 years after the return was filed.''.
    (c) Use of Documentation for Enforcement Purposes.--Section 274A of 
the Immigration and Nationality Act (8 U.S.C. 1324a) is amended--
            (1) in subparagraph (b)(5), by inserting ``, section 
        162(c)(4) of the Internal Revenue Code of 1986,'' after 
        ``enforcement of this Act'';
            (2) in subparagraph (d)(2)(F), by inserting ``, section 
        162(c)(4) of the Internal Revenue Code of 1986,'' after 
        ``enforcement of this Act''; and
            (3) in subparagraph (d)(2)(G), by inserting ``section 
        162(c)(4) of the Internal Revenue Code of 1986 or'' after ``or 
        enforcement of''.
    (d) Availability of Information.--
            (1) In general.--The Commissioner of Social Security, the 
        Secretary of the Department of Homeland Security, and the 
        Secretary of the Treasury, shall jointly establish a program to 
        share information among such agencies that may or could lead to 
        the identification of unauthorized aliens (as defined under 
        section 274A(h)(3) of the Immigration and Nationality Act), 
        including any no-match letter, any information in the earnings 
        suspense file, and any information in the investigation and 
        enforcement of section 162(c)(4) of the Internal Revenue Code 
        of 1986.
            (2) Disclosure by secretary of the treasury.--
                    (A) In general.--Subsection (i) of section 6103 of 
                the Internal Revenue Code of 1986 is amended by adding 
                at the end the following new paragraph:
            ``(9) Payment of wages to unauthorized aliens.--Upon 
        request from the Commissioner of the Social Security 
        Administration or the Secretary of the Department of Homeland 
        Security, the Secretary shall disclose to officers and 
        employees of such Administration or Department--
                    ``(A) taxpayer identity information of employers 
                who paid wages with respect to which a deduction was 
                not allowed by reason of section 162(c)(4), and
                    ``(B) taxpayer identity information of individuals 
                to whom such wages were paid,
        for purposes of carrying out any enforcement activities of such 
        Administration or Department with respect to such employers or 
        individuals.''.
                    (B) Recordkeeping.--Paragraph (4) of section 
                6103(p) of such Code is amended--
                            (i) by striking ``(5), or (7)'' in the 
                        matter preceding subparagraph (A) and inserting 
                        ``(5), (7), or (9)'', and
                            (ii) by striking ``(5) or (7)'' in 
                        subparagraph (F)(ii) and inserting ``(5), (7), 
                        or (9)''.
    (e) Effective Date.--
            (1) Except as provided in paragraph (2), this Act and the 
        amendments made by this Act shall take effect on the date of 
        the enactment of this Act.
            (2) The amendments made by subsections (a) and (b) shall 
        apply to taxable years beginning after December 31, 2018.

SEC. 3. MODIFICATION OF E-VERIFY PROGRAM.

    (a) Making Permanent.--Subsection (b) of section 401 of the Illegal 
Immigration Reform and Immigrant Responsibility Act of 1996 (8 U.S.C. 
1324a note) is amended by striking the last sentence.
    (b) Application to Current Employees.--
            (1) Voluntary election.--The first sentence of section 
        402(a) of such Act is amended to read as follows: ``Any person 
        or other entity that conducts any hiring (or recruitment or 
        referral) in a State or employs any individuals in a State may 
        elect to participate in the E-Verify Program.''.
            (2) Benefit of rebuttable presumption.--Paragraph (1) of 
        section 402(b) of such Act is amended by adding at the end the 
        following: ``If a person or other entity is participating in 
        the E-Verify Program and obtains confirmation of identity and 
        employment eligibility in compliance with the terms and 
        conditions of the program with respect to individuals employed 
        by the person or entity, the person or entity has established a 
        rebuttable presumption that the person or entity has not 
        violated section 274A(a)(2) with respect to such 
        individuals.''.
            (3) Scope of election.--Subparagraph (A) of section 
        402(c)(2) of such Act is amended to read as follows:
                    ``(A) In general.--Any electing person or other 
                entity may provide that the election under subsection 
                (a) shall apply (during the period in which the 
                election is in effect)--
                            ``(i) to all its hiring (and all 
                        recruitment or referral);
                            ``(ii) to all its hiring (and all 
                        recruitment or referral and all individuals 
                        employed by the person or entity);
                            ``(iii) to all its hiring (and all 
                        recruitment or referral) in one or more States 
                        or one or more places of hiring (or recruitment 
                        or referral, as the case may be); or
                            ``(iv) to all its hiring (and all 
                        recruitment or referral and all individuals 
                        employed by the person or entity) in one or 
                        more States or one or more place of hiring (or 
                        recruitment or referral or employment, as the 
                        case may be).''.
            (4) Procedures for participants in e-verify program.--
        Subsection (a) of section 403 of such Act is amended--
                    (A) in the matter preceding paragraph (1), by 
                inserting ``or continued employment in the United 
                States'' after ``United States''; and
                    (B) in paragraph (3)--
                            (i) in subparagraph (A), by striking all 
                        that follows ``(as specified by the Secretary 
                        of Homeland Security)'' and inserting ``after 
                        the date of the hiring, or recruitment or 
                        referral, in the case of inquiries made 
                        pursuant to a hiring, recruitment or referral 
                        (and not of previously hired individuals).''; 
                        and
                            (ii) in subparagraph (B), by striking 
                        ``such 3 working days'' and inserting ``the 
                        specified period''.
    (c) Application to Job Applicants.--Section 402(c)(2) of such Act 
is amended by adding at the end the following:
                    ``(C) Job offer may be made conditional on final 
                confirmation by e-verify.--A person or other entity 
                that elects to participate in the E-Verify Program may 
                offer a prospective employee an employment position 
                conditioned on final verification of the identity and 
                employment eligibility of the employee using the 
                employment eligibility confirmation system established 
                under section 404.''.
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