NEW GIG Act of 2019

II 116TH CONGRESS 1ST SESSION S. 700 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 MARCH 7, 2019 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 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 ‘‘New Economy Works 4 to Guarantee Independence and Growth Act of 2019’’ or 5 the ‘‘NEW GIG Act of 2019’’. 6 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 700 IS SEC. 2. DETERMINATION OF WORKER CLASSIFICATION. 1 (a) IN GENERAL.—Chapter 79 of the Internal Rev- 2 enue Code of 1986 is amended by adding at the end the 3 following new section: 4 ‘‘SEC. 7706. DETERMINATION OF WORKER CLASSIFICATION. 5 ‘‘(a) IN GENERAL.—For purposes of this title (and 6 notwithstanding any provision of this title not contained 7 in this section to the contrary), if the requirements of sub- 8 sections (b), (c), and (d) are met with respect to any serv- 9 ice performed by a service provider, then with respect to 10 such service— 11 ‘‘(1) the service provider shall not be treated as 12 an employee, 13 ‘‘(2) the service recipient shall not be treated as 14 an employer, 15 ‘‘(3) any payor shall not be treated as an em- 16 ployer, and 17 ‘‘(4) the compensation paid or received for such 18 service shall not be treated as paid or received with 19 respect to employment. 20 ‘‘(b) GENERAL SERVICE PROVIDER REQUIRE- 21 MENTS.— 22 ‘‘(1) IN GENERAL.—The requirements of this 23 subsection are met with respect to any service if the 24 service provider either— 25 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 700 IS ‘‘(A) meets the requirements of paragraph 1 (2) with respect to such service, or 2 ‘‘(B) in the case of a service provider en- 3 gaged in the trade or business of selling (or so- 4 liciting the sale of) goods or services, meets the 5 requirements of paragraph (3) with respect to 6 such service. 7 ‘‘(2) GENERAL REQUIREMENTS.— 8 ‘‘(A) IN GENERAL.—The requirements of 9 this paragraph are met with respect to any 10 service if the service provider, in connection 11 with performing the service— 12 ‘‘(i) incurs expenses— 13 ‘‘(I) which are deductible under 14 section 162, and 15 ‘‘(II) a significant portion of 16 which are not reimbursed, 17 ‘‘(ii) agrees to perform the service for 18 a particular amount of time, to achieve a 19 specific result, or to complete a specific 20 task, and 21 ‘‘(iii) satisfies not less than one of the 22 factors described in subparagraph (B). 23 ‘‘(B) FACTORS.—The factors described in 24 this subparagraph are the following: 25 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 700 IS ‘‘(i) The service provider has a signifi- 1 cant investment in assets or training which 2 are applicable to the service performed. 3 ‘‘(ii) The service provider is not re- 4 quired to perform services exclusively for 5 the service recipient or payor. 6 ‘‘(iii) The service provider has not 7 been treated as an employee by the service 8 recipient or payor for substantially the 9 same services during the 1-year period 10 ending with the date of the commencement 11 of services under the contract described in 12 subsection (d). 13 ‘‘(iv) The service provider is not com- 14 pensated on a basis which is tied primarily 15 to the number of hours actually worked. 16 ‘‘(3) ALTERNATIVE REQUIREMENTS WITH RE- 17 SPECT TO SALES PERSONS.—In the case of a service 18 provider engaged in the trade or business of selling 19 (or soliciting the sale of) goods or services, the re- 20 quirements of this paragraph are met with respect 21 to any service provided in the ordinary course of 22 such trade or business if— 23 ‘‘(A) the service provider is compensated 24 primarily on a commission basis, and 25 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 700 IS ‘‘(B) substantially all the compensation for 1 such service is directly related to sales of goods 2 or services rather than to the number of hours 3 worked. 4 ‘‘(c) PLACE OF BUSINESS OR OWN EQUIPMENT RE- 5 QUIREMENT.—The requirement of this subsection is met 6 with respect to any service if the service provider— 7 ‘‘(1) has a principal place of business, 8 ‘‘(2) does not provide the service primarily in 9 the service recipient’s place of business, 10 ‘‘(3) pays a fair market rent for use of the serv- 11 ice recipient’s or payor’s place of business, or 12 ‘‘(4) provides the service primarily using equip- 13 ment supplied by the service provider. 14 ‘‘(d) WRITTEN CONTRACT REQUIREMENT.—The re- 15 quirements of this subsection are met with respect to any 16 service if such service is performed pursuant to a written 17 contract between the service provider and the service re- 18 cipient or payor, whichever is applicable, which meets the 19 following requirements: 20 ‘‘(1) The contract includes each of the fol- 21 lowing: 22 ‘‘(A) The service provider’s name, taxpayer 23 identification number, and address. 24 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 700 IS ‘‘(B) A statement that the service provider 1 will not be treated as an employee with respect 2 to the services provided pursuant to the con- 3 tract for purposes of this title. 4 ‘‘(C) A statement that the service recipient 5 or payor will withhold upon and report to the 6 Internal Revenue Service the compensation pay- 7 able pursuant to the contract consistent with 8 the requirements of this title. 9 ‘‘(D) A statement that the service provider 10 is responsible for payment of Federal, State, 11 and local taxes, including self-employment 12 taxes, on compensation payable pursuant to the 13 contract. 14 ‘‘(E) A statement that the contract is in- 15 tended to be considered a contract described in 16 this subsection. 17 The contract shall not fail to meet the requirements 18 of this paragraph merely because the information 19 described in subparagraph (A) is collected at the 20 time payment is made for the services and not in ad- 21 vance, or because the contract provides that an 22 agent of the service recipient or payor will fulfill any 23 of the responsibilities of the service recipient or 24 payor described in the preceding subparagraphs. 25 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 700 IS ‘‘(2) The term of the contract does not exceed 1 2 years. The preceding sentence shall not prevent 2 one or more subsequent written renewals of the con- 3 tract from satisfying the requirements of this sub- 4 section if the term of each such renewal does not ex- 5 ceed 2 years and if the information required under 6 paragraph (1)(A) is updated in connection with each 7 such renewal. 8 ‘‘(3) The contract (or renewal) is signed (which 9 may include signatures in electronic form) by the 10 service recipient or payor and the service provider 11 not later than the date on which the aggregate pay- 12 ments made by the service recipient or payor to the 13 service provider exceeds $1,000 for the year covered 14 by the contract (or renewal). 15 ‘‘(e) REPORTING REQUIREMENTS.— 16 ‘‘(1) IN GENERAL.—For purposes of making 17 any determination with respect to the liability of a 18 service recipient or payor for any tax during any 19 taxable year with respect to a service provider, the 20 application of this section shall be conditioned on ei- 21 ther the service recipient or the payor satisfying the 22 reporting requirements applicable to such service re- 23 cipient or payor under section 6041(a), 6041A(a), or 24 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 700 IS 6050W with respect to such service provider for 1 such period. 2 ‘‘(2) REASONABLE CAUSE.—For purposes of 3 paragraph (1), such reporting requirements shall be 4 treated as met if the failure to satisfy such require- 5 ments is due to reasonable cause and not willful ne- 6 glect. 7 ‘‘(f) EXCEPTION FOR SERVICES PROVIDED BY 8 OWNER.—This section shall not apply with respect to any 9 service provided by a service provider to a service recipient 10 or payor if the service provider owns any interest in the 11 service recipient or the payor with respect to the service 12 provided. The preceding sentence shall not apply in the 13 case of a service recipient or payor the stock of which is 14 regularly traded on an established securities market. 15 ‘‘(g) LIMITATION ON RECLASSIFICATION BY SEC- 16 RETARY.—For purposes of this title— 17 ‘‘(1) EFFECT OF RECLASSIFICATION ON SERV- 18 ICE RECIPIENTS AND PAYORS.—A determination by 19 the Secretary that a service recipient or a payor 20 should have treated a service provider as an em- 21 ployee shall be effective with respect to the service 22 recipient or payor no earlier than the notice date 23 if— 24 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 700 IS ‘‘(A) the service recipient or the payor en- 1 tered into a written contract with the service 2 provider which meets the requirements of sub- 3 section (d), 4 ‘‘(B) the service recipient or the payor sat- 5 isfied the applicable reporting requirements of 6 section 6041(a), 6041A(a), or 6050W for all 7 relevant taxable years with respect to the serv- 8 ice provider, 9 ‘‘(C) the service recipient or the payor col- 10 lected and paid over all applicable taxes im- 11 posed under subtitle C for all relevant taxable 12 years with respect to the service provider, and 13 ‘‘(D) the service recipient or the payor 14 demonstrates a reasonable basis for having de- 15 termined that the service provider should not be 16 treated as an employee under this section and 17 that such determination was made in good 18 faith. 19 ‘‘(2) EFFECT OF RECLASSIFICATION ON SERV- 20 ICE PROVIDERS.—A determination by the Secretary 21 that a service provider should have been treated as 22 an employee shall be effective with respect to the 23 service provider no earlier than the notice date if— 24 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 10 •S 700 IS ‘‘(A) the service provider entered into a 1 written contract with the service recipient or 2 the payor which meets the requirements of sub- 3 section (d), 4 ‘‘(B) the service provider satisfied the ap- 5 plicable reporting requirements of sections 6 6012(a) and 6017 for all relevant taxable years 7 with respect to the service recipient or the 8 payor, and 9 ‘‘(C) the service provider demonstrates a 10 reasonable basis for determining that the serv- 11 ice provider is not an employee under this sec- 12 tion and that such determination was made in 13 good faith. 14 ‘‘(3) NOTICE DATE.—For purposes of this sub- 15 section, the term ‘notice date’ means the 30th day 16 after the earliest of— 17 ‘‘(A) the date on which the first letter of 18 proposed deficiency which allows the service 19 provider, the service recipient, or the payor an 20 opportunity for administrative review in the In- 21 ternal Revenue Service Office of Appeals is 22 sent, 23 ‘‘(B) the date on which a deficiency notice 24 under section 6212 is sent, or 25 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 11 •S 700 IS ‘‘(C) the date on which a notice of deter- 1 mination under section 7436(b)(2) is sent. 2 ‘‘(4) REASONABLE CAUSE EXCEPTION.—The re- 3 quirements of paragraphs (1)(B), (1)(C), and (2)(B) 4 shall be treated as met if the failure to satisfy such 5 requirements is due to reasonable cause and not 6 willful neglect. 7 ‘‘(5) NO RESTRICTION ON ADMINISTRATIVE OR 8 JUDICIAL REVIEW.—Nothing in this subsection shall 9 be construed as limiting any provision of law which 10 provides an opportunity for administrative or judi- 11 cial review of a determination by the Secretary. 12 ‘‘(h) RULE OF CONSTRUCTION.—Nothing in this sec- 13 tion shall be construed as— 14 ‘‘(1) limiting the ability or right of a service 15 provider, service recipient, or payor to apply any 16 other provision of this title, section 530 of the Rev- 17 enue Act of 1978, or any common law rules for de- 18 termining whether an individual is an employee, or 19 ‘‘(2) establishing a prerequisite for the applica- 20 tion of any provision of law described in paragraph 21 (1). 22 ‘‘(i) DEFINITIONS.—For purposes of this section— 23 ‘‘(1) SERVICE PROVIDER.— 24 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S700.IS S700 pamtmann on DSKBFK8HB2PROD with BILLS 12 •S 700 IS ‘‘(A) IN GENERAL.—The term ‘service pro- 1 vider’ means any qualified person who performs 2 service for another person. 3 ‘‘(B) QUALIFIED PERSON.—The term 4 ‘qualified person’ means— 5 ‘‘(i) any natural person, or 6 ‘‘(ii) any entity if any of the services 7 referred to in subparagraph (A) are per- 8 formed by one or more natural persons 9 who directly own interests in such entity. 10 ‘‘(2) SERVICE RECIPIENT.—The term ‘service 11 recipient’ means the person for whom the service 12 provider performs such service. 13 ‘‘(3) PAYOR.—The term ‘payor’ means— 14 ‘‘(A) any person, including the service re- 15 cipient, who pays the service provider for per- 16 forming such service, or 17 ‘‘(B) any marketplace platform, as defined 18 in section 6050W(d)(3)(C). 19 ‘‘(j) REGULATIONS.—Notwithstanding section 530(d) 20 of the Revenue Act of 1978, the Secretary shall issue such 21 regulations as the Secretary determines are necessary to 22 carry out the purposes of this section.’’. 23 (b) VOLUNTARY WITHHOLDING AGREEMENTS AND 24 WORKER CLASSIFICATION.—Section 3402(p) of the Inter- 25 VerDate Sep 11 2014 21:29 Mar 22, 2019 Jkt 089200 PO [Text truncated for display. 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