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Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Independent Contractor Tax
Simplification Act of 1995''.

SEC. 2. FINDINGS.

The Congress finds that:
(1) Simplifying the tax rules with respect to independent
contractors was the top vote-getter at the 1995 White House
Conference on Small Business. Conference delegates recommended
that Congress ''should recognize the legitimacy of an
independent contractor''. The Conference found that the current
common law is ''too subjective'' and called upon the Congress
to establish ''realistic and consistent guidelines''.
(2) It is in the best interests of taxpayers and the
Federal Government to have fair and objective rules for
determining who is an employee and who is an independent
contractor.

SEC. 3. STANDARDS FOR DETERMINING WHETHER INDIVIDUALS ARE NOT
EMPLOYEES.

(a) In General.--Chapter 25 of the Internal Revenue Code of 1986
(general provisions relating to employment taxes) is amended by adding
after section 3510 the following new section:

''SEC. 3511. STANDARDS FOR DETERMINING WHETHER INDIVIDUALS ARE NOT
EMPLOYEES.

''(a) General Rule.--For purposes of this subtitle, and
notwithstanding any provision of this subtitle to the contrary, if the
requirements of subsections (b), (c), and (d) are met with respect to
any service performed by any individual, 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, and
''(3) the payor shall not be treated as an employer.
''(b) Service Provider Requirements With Regard to Service
Recipient.--For the purposes of subsection (a), the requirements of
this subsection are met if the service provider, in connection with
performing the service--
''(1) has a significant investment in assets and/or
training,
''(2) incurs significant unreimbursed expenses,
''(3) agrees to perform the service for a particular amount
of time or to complete a specific result and is liable for
damages for early termination without cause,
''(4) is paid primarily on a commissioned basis, or
''(5) purchases products for resale.
''(c) Additional Service Provider Requirements With Regard to
Others.--For the purposes of subsection (a), the requirements of this
subsection are met if--
''(1) the service provider--
''(A) has a principal place of business,
''(B) does not primarily provide the service in the
service recipient's place of business, or
''(C) pays a fair market rent for use of the
service recipient's place of business; or
''(2) the service provider--
''(A) is not required to perform service
exclusively for the service recipient, and
''(B) in the year involved, or in the preceding or
subsequent year--
''(i) has performed a significant amount of
service for other persons,
''(ii) has offered to perform service for
other persons through--
''(I) advertising,
''(II) individual written or oral
solicitations,
''(III) listing with registries,
agencies, brokers, and other persons in
the business of providing referrals to
other service recipients, or
''(IV) other similar activities, or
''(iii) provides service under a business
name which is registered with (or for which a
license has been obtained from) a State, a
political subdivision of a State, or any agency
or instrumentality of 1 or more States or
political subdivisions.
''(d) Written Document Requirements.--For purposes of subsection
(a), the requirements of this subsection are met if the services
performed by the individual are performed pursuant to a written
contract between such individual and the person for whom the services
are performed, or the payor, and such contract provides that the
individual will not be treated as an employee with respect to such
services for purposes of this subtitle.
''(e) Special Rules.--For purposes of this section--
''(1) If for any taxable year any service recipient or
payor fails to meet the applicable reporting requirements of
sections 6041(a), 6041A(a), or 6051 with respect to a service
provider, then, unless such failure is due to reasonable cause
and not willful neglect, this section shall not apply in
determining whether such service provider shall not be treated
as an employee of such service recipient or payor for such
year.
''(2) If the service provider is performing services
through an entity owned in whole or in part by such service
provider, then the references to 'service provider' in
subsections (b) through (d) may include such entity, provided
that the written contract referred to in paragraph (1) of
subsection (d) may be with either the service provider or such
entity and need not be with both.
''(f) Definitions.--For the purposes of this section--
''(1) Service provider.--The term 'service provider' means
any individual who performs service for another person.
''(2) Service recipient.--Except as provided in paragraph
(5), the term 'service recipient' means the person for whom the
service provider performs such service.
''(3) Payor.--Except as provided in paragraph (5), the term
'payor' means the person who pays the service provider for the
performance of such service in the event that the service
recipients do not pay the service provider.
''(4) In connection with performing the service.--The term
'in connection with performing the service' means in connection
or related to--
''(A) the actual service performed by the service
provider for the service recipients or for other
persons for whom the service provider has performed
similar service, or
''(B) the operation of the service provider's trade
or business.
''(5) Exceptions.--The terms 'service recipient' and
'payor' do not include any entity which is owned in whole or in
part by the service provider.''
(b) Clerical Amendment.--The table of sections for chapter 25 of
such Code is amended by adding at the end the following new item:

''Sec. 3511. Standards for determining
whether individuals are not
employees.''
(c) Effective Date.--The amendments made by this Act shall apply to
services performed after December 31, 1995.
A:
Independent Contractor Tax Simplification Act of 1995 - Amends the Internal Revenue Code to provide that, for purposes of determining the employment status of individuals as employees, a service provider shall not be treated as an employee, a service recipient shall not be treated as an employer, and a payor shall not be treated as an employer if: (1) a service provider has a significant investment in assets and training, incurs significant unreimbursed expenses, agrees to perform the service for a specified amount of time or to complete a specific result and is responsible for damages for early termination without cause, receives payment primarily on a commission basis, or has purchased resale products; (2) the service provider has a principal place of business, does not primarily provide service in the service recipient's place of business, or pays a fair market rent for use of the recipient's place of business or does not have to perform service only for the service recipient and, in the current year or in the proceeding or subsequent years, has performed or has offered to perform a significant amount of service for other persons; and (3) the services by an individual are performed according to a written contract between the service recipient or payor which provides that the individual will not be treated as an employee.