Small Business Tax Fairness and Compliance Simplification Act

II 117TH CONGRESS 1ST SESSION S. 1233 To amend the Internal Revenue Code of 1986 to simplify reporting require- ments, promote tax compliance, and reduce tip reporting compliance burdens in the beauty service industry. IN THE SENATE OF THE UNITED STATES APRIL 20, 2021 Mr. CARDIN (for himself and Mr. PORTMAN) 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 simplify reporting requirements, promote tax compliance, and re- duce tip reporting compliance burdens in the beauty serv- ice industry. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Small Business Tax 4 Fairness and Compliance Simplification Act’’. 5 VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 1233 IS SEC. 2. EXTENSION OF CREDIT FOR PORTION OF EM- 1 PLOYER SOCIAL SECURITY TAXES PAID WITH 2 RESPECT TO EMPLOYEE TIPS TO BEAUTY 3 SERVICE ESTABLISHMENTS. 4 (a) EXTENSION OF TIP CREDIT TO BEAUTY SERVICE 5 BUSINESS.— 6 (1) IN GENERAL.—Section 45B(b)(2) of the In- 7 ternal Revenue Code of 1986 is amended to read as 8 follows: 9 ‘‘(2) APPLICATION ONLY TO CERTAIN LINES OF 10 BUSINESS.—In applying paragraph (1) there shall 11 be taken into account only tips received from cus- 12 tomers or clients in connection with the following 13 services: 14 ‘‘(A) The providing, delivering, or serving 15 of food or beverages for consumption, if the tip- 16 ping of employees delivering or serving food or 17 beverages by customers is customary. 18 ‘‘(B) The providing of beauty services to a 19 customer or client if the tipping of employees 20 providing such services is customary.’’. 21 (2) BEAUTY SERVICE DEFINED.—Section 45B 22 of such Code is amended by adding at the end the 23 following new subsection: 24 ‘‘(e) BEAUTY SERVICE.—For purposes of this sec- 25 tion, the term ‘beauty service’ means any of the following: 26 VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 1233 IS ‘‘(1) Barbering and hair care. 1 ‘‘(2) Nail care. 2 ‘‘(3) Esthetics. 3 ‘‘(4) Body and spa treatments.’’. 4 (b) CREDIT DETERMINED WITH RESPECT TO MIN- 5 IMUM WAGE IN EFFECT.—Section 45B(b)(1)(B) of the 6 Internal Revenue Code of 1986 is amended— 7 (1) by striking ‘‘as in effect on January 1, 8 2007, and’’; and 9 (2) by inserting ‘‘, and in the case of food or 10 beverage establishments, as in effect on January 1, 11 2007’’ after ‘‘without regard to section 3(m) of such 12 Act’’. 13 (c) EFFECTIVE DATE.—The amendments made by 14 this section shall apply to taxable years beginning after 15 December 31, 2021. 16 SEC. 3. EMPLOYER TIP REPORTING SAFE HARBOR. 17 (a) IN GENERAL.—Section 3121(q) of the Internal 18 Revenue Code of 1986 is amended— 19 (1) by striking so much as precedes ‘‘of this 20 chapter’’ and inserting the following: 21 ‘‘(q) TIPS INCLUDED FOR BOTH EMPLOYEE AND 22 EMPLOYER TAXES.— 23 ‘‘(1) IN GENERAL.—For purposes’’; and 24 VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 1233 IS (2) by adding at the end the following new 1 paragraph: 2 ‘‘(2) TIP PROGRAM SAFE HARBOR.—In the case 3 of an employer who employs one or more employees 4 who receive tips in the course of such employment 5 which are attributable to the performance of beauty 6 services (as such term is defined in section 45B) are 7 considered remuneration for such employment under 8 this section, no IRS tip examination with respect to 9 such employer shall be initiated (except in the case 10 of a tip examination of a current or former em- 11 ployee) if the employer— 12 ‘‘(A) establishes an educational program 13 regarding applicable laws relating to proper re- 14 porting of tips received by employees for— 15 ‘‘(i) new employees, which shall in- 16 clude both verbal explanation and written 17 materials, and 18 ‘‘(ii) existing employees, which shall 19 be conducted quarterly, 20 ‘‘(B) establishes procedures for tipped em- 21 ployees to provide monthly reporting of cash 22 and charged services and related tip income of 23 at least $20 under section 6053(a), 24 VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 1233 IS ‘‘(C) complies with all applicable Federal 1 tax law requirements applicable to employers 2 for purposes of filing returns, and collection 3 and payment of taxes imposed, with respect to 4 tip income received by employees, and 5 ‘‘(D) maintains employee records related 6 to— 7 ‘‘(i) contact information for such em- 8 ployees, and 9 ‘‘(ii) gross receipts from any services 10 subject to tipping, and charge receipts for 11 such services, for a period of not less than 12 4 calendar years after the calendar year to 13 which the records relate.’’. 14 (b) EFFECTIVE DATE.—The amendments made by 15 this section shall apply to taxable years beginning after 16 December 31, 2021. 17 SEC. 4. INFORMATION REPORTING OF INCOME FROM 18 SPACE RENTALS IN THE BEAUTY SERVICE IN- 19 DUSTRY. 20 (a) IN GENERAL.—Subpart B of part III of sub- 21 chapter A of chapter 61 of the Internal Revenue Code of 22 1986 is amended by adding at the end the following new 23 section: 24 VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 1233 IS ‘‘SEC. 6050Z. RETURNS RELATING TO INCOME FROM CER- 1 TAIN RENTALS OF SPACE IN THE BEAUTY 2 SERVICE INDUSTRY. 3 ‘‘(a) REQUIREMENT OF REPORTING.—Any person 4 who, in the course of a trade or business and for any cal- 5 endar year, receives rental payments from two or more 6 individuals providing beauty services (as defined in section 7 45B(e)) aggregating $600 or more each for the lease of 8 space to provide such services to third-party patrons shall 9 make the return described in subsection (b) with respect 10 to each person from whom such rent was so received at 11 such time as the Secretary may by regulations prescribe. 12 ‘‘(b) RETURN.—A return is described in this sub- 13 section if such return— 14 ‘‘(1) is in such form as the Secretary may pre- 15 scribe, and 16 ‘‘(2) contains— 17 ‘‘(A) the name, address, and TIN of each 18 person from whom a rental payment described 19 in subsection (a) was received during the cal- 20 endar year, 21 ‘‘(B) the aggregate amount of such pay- 22 ments received by such person during such cal- 23 endar year and the date and amount of each 24 such payment, and 25 VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 1233 IS ‘‘(C) such other information as the Sec- 1 retary may require. 2 ‘‘(c) STATEMENT TO BE FURNISHED TO PERSONS 3 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 4 ‘‘(1) IN GENERAL.—Every person required to 5 make a return under subsection (a) shall furnish to 6 each person whose name is required to be set forth 7 in such return a written statement showing— 8 ‘‘(A) the name, address, and phone num- 9 ber of the information contact of the person re- 10 quired to make such a return, and 11 ‘‘(B) the aggregate amount of payments to 12 the person required to be shown on the return. 13 ‘‘(2) FURNISHING OF INFORMATION.—The 14 written statement required under paragraph (1) 15 shall be furnished to the person on or before Janu- 16 ary 31 of the year following the calendar year for 17 which the return under subsection (a) is required to 18 be made. 19 ‘‘(d) REGULATIONS AND GUIDANCE.—The Secretary 20 may prescribe such regulations and other guidance as may 21 be appropriate or necessary to carry out the purpose of 22 this subsection, including rules to prevent duplicative re- 23 porting of transactions.’’. 24 VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 1233 IS (b) CLERICAL AMENDMENT.—The table of sections 1 for subchapter A of chapter 61 of such Code is amended 2 by adding at the end the following new item: 3 ‘‘Sec. 6050Z. Returns relating to income from certain rentals of space in the beauty service industry.’’. (c) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to payments made after December 5 31, 2021. 6 Æ VerDate Sep 11 2014 22:46 May 17, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S1233.IS S1233 pbinns on DSKJLVW7X2PROD with BILLS