,,ii #aacth ,,congress #ast ,session ,s4 #dgi ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #f1 #bjac ,mr4 ,grassley 7for himself1 ,mr4 ,nelson1 ,mr4 ,portman1 and ,mr4 ,pryor7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to clarify the employment tax treatment and reporting of wages paid by professional employer organizations1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,small ,business ,efficiency ,act4 #b4 ,certified professional employer organizations 7a7 ,employment taxes ,chapter #be of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #ceaa4 ,certified professional employer organizations 7a7 ,general rules ,for purposes of the taxes1 and other obligations1 imposed by this subtitle-- 7#a7 a certified professional employer organization shall be treated as the employer 7and no other person shall be treated as the employer7 of any work site employee performing services for any customer of such organization1 but only with respect to remuneration remitted by such organization to such work site employee1 and 7#b7 exclusions1 definitions1 and other rules which are based on the type of employer and which would 7but for paragraph 7#a77 apply shall apply with respect to such taxes imposed on such remuneration4 7b7 ,successor employer status ,for purposes of sections #caba7;a77#a71 #cbca7;e77#b77;,c71 and #ccjf7;b77#a7-- 7#a7 a certified professional employer organization entering into a service contract with a customer with respect to a work site employee shall be treated as a successor employer and the customer shall be treated as a predecessor employer during the term of such service contract1 and 7#b7 a customer whose service contract with a certified professional employer organization is terminated with respect to a work site employee shall be treated as a successor employer and the certified professional employer organization shall be treated as a predecessor employer4 7c7 ,liability of certified professional employer organization ,solely for purposes of its liability for the taxes1 and other obligations1 imposed by this subtitle-- 7#a7 a certified professional employer organization shall be treated as the employer of any individual 7other than a work site employee or a person described in subsection 7f77 who is performing services covered by a contract meeting the requirements of section #ggje7;e77#b71 but only with respect to remuneration remitted by such organization to such individual1 and 7#b7 exclusions1 definitions1 and other rules which are based on the type of employer and which would 7but for paragraph 7#a77 apply shall apply with respect to such taxes imposed on such remuneration4 7d7 ,treatment of credits 7#a7 ,in general ,for purposes of any credit specified in paragraph 7#b7-- 7,a7 such credit with respect to a work site employee performing services for the customer applies to the customer1 not the certified professional employer organization1 7,b7 the customer1 and not the certified professional employer organization1 shall take into account wages and employment taxes-- 7i7 paid by the certified professional employer organization with respect to the work site employee1 and 7ii7 for which the certified professional employer organization receives payment from the customer1 and 7,c7 the certified professional employer organization shall furnish the customer with any information necessary for the customer to claim such credit4 7#b7 ,credits specified ,a credit is specified in this paragraph if such credit is allowed under-- 7,a7 section #da 7credit for increasing research activity71 7,b7 section #de;,a 7,indian employment credit71 7,c7 section #de;,b 7credit for portion of employer social security taxes paid with respect to employee cash tips71 7,d7 section #de;,c 7clinical testing expenses for certain drugs for rare diseases or conditions71 7,e7 section #de,r 7employee health insurance expenses of small employers71 7,f7 section #ea 7work opportunity credit71 7,g7 section #ea;,a 7temporary incentives for employing long-term family assistance recipients71 7,h7 section #acif 7empowerment zone employment credit71 7,i7 #adjj7;d7 7,,dc ,zone employment credit71 7,j7 ,section #adjj;,h 7renewal community employment credit71 and 7,k7 any other section as provided by the ,secretary4 7e7 ,special rule for related party ,this section shall not apply in the case of a customer which bears a relationship to a certified professional employer organization described in section #bfg7;b7 or #gjg7;b74 ,for purposes of the preceding sentence1 such sections shall be applied by substituting #aj percent for #ej percent4 7f7 ,special rule for certain individuals ,for purposes of the taxes imposed under this subtitle1 an individual with net earnings from self-employment derived from the customer's trade or business is not a work site employee with respect to remuneration paid by a certified professional employer organization4 7g7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section4 4 7b7 ,certified professional employer organization defined ,chapter #gi of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #ggje4 ,certified professional employer organizations defined 7a7 ,in general ,for purposes of this title1 the term certified professional employer organization means a person who has been certified by the ,secretary for purposes of section #ceaa as meeting the requirements of subsection 7b74 7b7 ,general requirements ,a person meets the requirements of this subsection if such person-- 7#a7 demonstrates that such person 7and any owner1 officer1 and such other persons as may be specified in regulations7 meets such requirements as the ,secretary shall establish with respect to tax status1 background1 experience1 business location1 and annual financial audits1 7#b7 computes its taxable income using an accrual method of accounting unless the ,secretary approves another method1 7#c7 agrees that it will satisfy the bond and independent financial review requirements of subsection 7c7 on an ongoing basis1 7#d7 agrees that it will satisfy such reporting obligations as may be imposed by the ,secretary1 7#e7 agrees to verify on such periodic basis as the ,secretary may prescribe that it continues to meet the requirements of this subsection1 and 7#f7 agrees to notify the ,secretary in writing within such time as the ,secretary may prescribe of any change that materially affects whether it continues to meet the requirements of this subsection4 7c7 ,bond and independent financial review requirements 7#a7 ,in general ,an organization meets the requirements of this paragraph if such organization-- 7,a7 meets the bond requirements of paragraph 7#b71 and 7,b7 meets the independent financial review requirements of paragraph 7#c74 7#b7 ,bond 7,a7 ,in general ,a certified professional employer organization meets the requirements of this paragraph if the organization has posted a bond for the payment of taxes under subtitle ,c 7in a form acceptable to the ,secretary7 in an amount at least equal to the amount specified in subparagraph 7,b74 7,b7 ,amount of bond ,for the period ,april #a of any calendar year through ,march #ca of the following calendar year1 the amount of the bond required is equal to the greater of-- 7i7 #e percent of the organization's liability under section #ceaa for taxes imposed by subtitle ,c during the preceding calendar year 7but not to exceed #a1jjj1jjj71 or 7ii7 #ej1jjj4 7#c7 ,independent financial review requirements ,a certified professional employer organization meets the requirements of this paragraph if such organization-- 7,a7 has1 as of the most recent review date1 caused to be prepared and provided to the ,secretary 7in such manner as the ,secretary may prescribe7 an opinion of an independent certified public accountant that the certified professional employer organization's financial statements are presented fairly in accordance with generally accepted accounting principles1 and 7,b7 provides1 not later than the last day of the second month beginning after the end of each calendar quarter1 to the ,secretary from an independent certified public accountant an assertion regarding ,federal employment tax payments and an examination level attestation on such assertion4 ,such assertion shall state that the organization has withheld and made deposits of all taxes imposed by chapters #ba1 #bb1 and #bd of the ,internal ,revenue ,code in accordance with regulations imposed by the ,secretary for such calendar quarter and such examination level attestation shall state that such assertion is fairly stated1 in all material respects4 7#d7 ,controlled group rules ,for purposes of the requirements of paragraphs 7#b7 and 7#c71 all professional employer organizations that are members of a controlled group within the meaning of sections #dad7;b7 and 7c7 shall be treated as a single organization4 7#e7 ,failure to file assertion and attestation ,if the certified professional employer organization fails to file the assertion and attestation required by paragraph 7#c7 with respect to any calendar quarter1 then the requirements of paragraph 7#c7 with respect to such failure shall be treated as not satisfied for the period beginning on the due date for such attestation4 7#f7 ,review date ,for purposes of paragraph 7#c77;,a71 the review date shall be #f months after the completion of the organization's fiscal year4 7d7 ,suspension and revocation authority ,the ,secretary may suspend or revoke a certification of any person under subsection 7b7 for purposes of section #ceaa if the ,secretary determines that such person is not satisfying the representations or requirements of subsections 7b7 or 7c71 or fails to satisfy applicable accounting1 reporting1 payment1 or deposit requirements4 7e7 ,work site employee ,for purposes of this title-- 7#a7 ,in general ,the term work site employee means1 with respect to a certified professional employer organization1 an individual who-- 7,a7 performs services for a customer pursuant to a contract which is between such customer and the certified professional employer organization and which meets the requirements of paragraph 7#b71 and 7,b7 performs services at a work site meeting the requirements of paragraph 7#c74 7#b7 ,service contract requirements ,a contract meets the requirements of this paragraph with respect to an individual performing services for a customer if such contract is in writing and provides that the certified professional employer organization shall-- 7,a7 assume responsibility for payment of wages to such individual1 without regard to the receipt or adequacy of payment from the customer for such services1 7,b7 assume responsibility for reporting1 withholding1 and paying any applicable taxes under subtitle ,c1 with respect to such individual's wages1 without regard to the receipt or adequacy of payment from the customer for such services1 7,c7 assume responsibility for any employee benefits which the service contract may require the organization to provide1 without regard to the receipt or adequacy of payment from the customer for such services1 7,d7 assume responsibility for hiring1 firing1 and recruiting workers in addition to the customer's responsibility for hiring1 firing and recruiting workers1 7,e7 maintain employee records relating to such individual1 and 7,f7 agree to be treated as a certified professional employer organization for purposes of section #ceaa with respect to such individual4 7#c7 ,work site coverage requirement ,the requirements of this paragraph are met with respect to an individual if at least #he percent of the individuals performing services for the customer at the work site where such individual performs services are subject to #a or more contracts with the certified professional employer organization which meet the requirements of paragraph 7#b7 7but not taking into account those individuals who are excluded employees within the meaning of section #dad7q77#e774 7f7 ,determination of employment status ,except to the extent necessary for purposes of section #ceaa1 nothing in this section shall be construed to affect the determination of who is an employee or employer for purposes of this title4 7g7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section4 4 7c7 ,conforming amendments 7#a7 ,section #ccjb of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7h7 ,treatment of certified professional employer organizations ,if a certified professional employer organization 7as defined in section #ggje71 or a customer of such organization1 makes a contribution to the ,state's unemployment fund with respect to a work site employee1 such organization shall be eligible for the credits available under this section with respect to such contribution4 4 7#b7 ,section #ccjc7;a7 of such ,code is amended-- 7,a7 by striking the period at the end of paragraph 7#c7 and inserting 2 and and by inserting after paragraph 7#c7 the following new paragraph3 7#d7 if the taxpayer is a certified professional employer organization 7as defined in section #ggje7 that is treated as the employer under section #ceaa1 such certified professional employer organization is permitted to collect and remit1 in accordance with paragraphs 7#a71 7#b71 and 7#c71 contributions during the taxable year to the ,state unemployment fund with respect to a work site employee4 1 and 7,b7 in the last sentence-- 7i7 by striking paragraphs 7#a71 7#b71 and 7#c7 and inserting paragraphs 7#a71 7#b71 7#c71 and 7#d71 and 7ii7 by striking paragraph 7#a71 7#b71 or 7#c7 and inserting paragraph 7#a71 7#b71 7#c71 or 7#d74 7#c7 ,section #fjec7;c7 of such ,code is amended by adding at the end the following new paragraph3 7#h7 ,certified professional employer organizations ,for purposes of any report required by this subsection1 in the case of a certified professional employer organization that is treated under section #ceaa as the employer of a work site employee1 the customer with respect to whom a work site employee performs services shall be the employer for purposes of reporting under this section and the certified professional employer organization shall furnish to the customer any information necessary to complete such reporting no later than such time as the ,secretary shall prescribe4 4 7d7 ,clerical amendments 7#a7 ,the table of sections for chapter #be of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new item3 ,sec4 #ceaa4 ,certified professional employer organizations4 4 7#b7 ,the table of sections for chapter #gi of such ,code is amended by inserting after the item relating to section #ggjd the following new item3 ,sec4 #ggje4 ,certified professional employer organizations defined4 4 7e7 ,reporting requirements and obligations ,the ,secretary of the ,treasury shall develop such reporting and recordkeeping rules1 regulations1 and procedures as the ,secretary determines necessary or appropriate to ensure compliance with the amendments made by this section with respect to entities applying for certification as certified professional employer organizations or entities that have been so certified4 ,such rules shall include-- 7#a7 notification of the ,secretary in the case of the commencement or termination of a service contract described in section #ggje7;e77#b7 of the ,internal ,revenue ,code of #aihf between such a person and a customer1 and the employer identification number of such customer1 and 7#b7 such other information as the ,secretary determines is essential to promote compliance with respect to the credits identified in section #ceaa7;d7 of such ,code1 and shall be designed in a manner which streamlines1 to the extent possible1 the application of requirements of such amendments1 the exchange of information between a certified professional employer organization and its customers1 and the reporting and recordkeeping obligations of the certified professional employer organization4 7f7 ,user fees ,subsection 7b7 of section #gebh of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#d7 ,certified professional employer organizations ,the annual fee charged under the program in connection with the ongoing certification by the ,secretary of a professional employer organization under section #ggje shall not exceed #a1jjj4 4 7g7 ,effective dates 7#a7 ,in general ,the amendments made by this section shall apply with respect to wages for services performed on or after ,january #a of the first calendar year beginning more than #ab months after the date of the enactment of this ,act4 7#b7 ,certification program ,the ,secretary of the ,treasury shall establish the certification program described in section #ggje7;b7 of the ,internal ,revenue ,code of #aihf1 as added by subsection 7b71 not later than #f months before the effective date determined under paragraph 7#a74 7h7 ,no inference ,nothing contained in this section or the amendments made by this section shall be construed to create any inference with respect to the determination of who is an employee or employer-- 7#a7 for ,federal tax purposes 7other than the purposes set forth in the amendments made by this section71 or 7#b7 for purposes of any other provision of law4