,i #aaeth ,,congress #ast ,session ,h4 ,r4 #ccif ,,in ,,the ,,house ,,of ,,representatives ,july #be1 #bjag,mr4 ,paulsen introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to change the classification of employers and employees for services providers4 #a4 ,determination of worker classification 7a7 ,in general ,chapter #gi of the ,internal ,revenue code of #aihf is amended by adding at the end the following new section3 #ggjf4 ,determination of worker classification 7a7 ,in general ,for purposes of this title 7and notwithstanding any provision of this title not contained in this section to the contrary71 if the requirements of subsections 7b71 7c71 and 7d7 are met with respect to any service performed by a service provider1 then with respect to such service-- 7#a7 the service provider shall not be treated as an employee1 7#b7 the service recipient shall not be treated as an employer1 7#c7 any payor shall not be treated as an employer1 and 7#d7 the compensation paid or received for such service shall not be treated as paid or received with respect to employment4 7b7 ,general service provider requirements 7#a7 ,in general ,the requirements of this subsection are met with respect to any service if the service provider either-- 7,a7 meets the requirements of paragraph 7#b7 with respect to such service1 or 7,b7 in the case a service provider engaged in the trade or business of selling 7or soliciting the sale of7 goods or services1 meets the requirements of paragraph 7#c7 with respect to such service4 7#b7 ,general requirements ,the requirements of this paragraph are met with respect to any service if the service provider1 in connection with performing the service-- 7,a7 either-- 7i7 incurs significant unreimbursed expenses as it relates to total expense1 or 7ii7 risks income fluctuations because remuneration with respect to such service is not related to the expenses incurred1 7,b7 agrees to perform the service for a particular amount of time1 to achieve a specific result1 or to complete a specific task1 and 7,c7 at least one of the following3 7i7 has an significant unreimbursed expenses as it relates to total expense in assets or training1 7ii7 is not required to perform services exclusively for the service recipient1 or 7iii7 has not performed services for the service recipient as an employee during the #a-year period ending with the date of the commencement of services under the contract described in subsection 7d74 7#c7 ,alternative requirements with respect to sales persons ,in the case of a service provider engaged in the trade or business of selling 7or soliciting the sale of7 goods or services1 the requirements of this paragraph are met with respect to any service if-- 7,a7 the service provider is compensated primarily on a commission basis1 and 7,b7 substantially all the compensation for such service is directly related to sales of goods or services rather than to the number of hours worked to a certain level or limit of highly compensated individuals4 7c7 ,place of business or own equipment requirement ,the requirement of this subsection is met with respect to any service if the service provider-- 7#a7 has a principal place of business1 which can be home or mobile-based1 or1 7#b7 provides the service primarily using equipment for which the service provider bears the ultimate financial responsibility4 7d7 ,written contract requirement ,the requirements of this subsection are met with respect to any service if such service is performed pursuant to a written contract between the service provider and the service recipient 7or payor7 which meets the following requirements3 7#a7 ,the contract includes each of the following3 7,a7 ,the service provider's name and address4 7,b7 ,a statement that the service provider will not be treated as an employee with respect to the services provided pursuant to the contract for purposes of this title4 7,c7 ,a statement that the service recipient 7or the payor7 will report to the ,internal ,revenue ,service the compensation payable pursuant to the contract consistent with the requirements of this title4 7,d7 ,a statement that the service provider is responsible for payment of ,federal1 ,state1 and local taxes1 including self-employment taxes1 on compensation payable pursuant to the contract4 7,e7 ,a statement that the contract is intended to be considered a contract described in this subsection4 7#b7 ,the term of the contract does not exceed #a year4 ,the preceding sentence shall not prevent one or more subsequent written renewals of the contract from satisfying the requirements of this subsection if the term of each such renewal does not exceed #a year and if the information required under paragraph 7#a77;,a7 is updated as needed in connection with each such renewal4 7#c7 ,the contract 7or renewal7 is signed by both the service recipient 7or payor7 and the service provider not later than the date on which the aggregate payments made by the service recipient to the service provider exceeds #fjj for the year covered by the contract 7or renewal74 7e7 ,reporting requirements ,if any service recipient or payor fails to meet the applicable reporting requirements of section #fjda7;a7 or #fjda;,a7a7 for any taxable year with respect to any service provider1 this section shall not apply for purposes of making any determination with respect to the liability of such service recipient or payor for any tax with respect to such service provider for such period4 ,for purposes of the preceding sentence1 such reporting requirements shall be treated as met if the failure to satisfy such requirements is due to reasonable cause and not willful neglect4 7f7 ,exception for services provided by owner ,this section shall not apply with respect to any service provided by a service provider to a service recipient if the service provider owns any interest in the service recipient or any payor with respect to the service provided4 ,the preceding sentence shall not apply in the case of a service recipient the stock of which is regularly traded on an established securities market4 7g7 ,limitation on reclassification by secretary ,for purposes of this title-- 7#a7 ,effect of reclassification on service recipients and payors ,a determination by the ,secretary that a service recipient or a payor should have treated a service provider as an employee shall be effective with respect to the service recipient or payor no earlier than the notice date if-- 7,a7 the service recipient or the payor entered into a written contract with the service provider which meets the requirements of subsection 7d71 7,b7 the service recipient or the payor satisfied the applicable reporting requirements of section 7a7 or #fjda;,a7a7 for all relevant taxable years with respect to the service provider1 and 7,c7 the service recipient or the payor demonstrates a reasonable basis for having determined that the service provider should not be treated as an employee under this section and that such determination was made in good faith4 7#b7 ,burden of proof 7,a7 ,in general ,if-- 7i7 a taxpayer establishes a prima facie case that it was reasonable not to treat an individual as an employee for purposes of this section1 and 7ii7 the taxpayer has fully cooperated with reasonable requests from the ,secretary of the ,treasury or his delegate1 then the burden of proof with respect to such treatment shall be on the ,secretary4 7,b7 ,exception for other reasonable basis ,in the case of any issue involving whether the taxpayer had a reasonable basis not to treat an individual as an employee for purposes of this section1 subparagraph 7,a7 shall only apply for purposes of determining whether the taxpayer meets the requirements of subparagraph 7,a71 7,b71 or 7,c7 of subsection 7a77#b74 7#c7 ,effect of reclassification on service providers ,a determination by the ,secretary that a service provider should have been treated as an employee shall be effective with respect to the service provider no earlier than the notice date if-- 7,a7 the service provider entered into a written contract with the service recipient or payor which meets the requirements of subsection 7d71 7,b7 the service recipient or payor satisfied the applicable reporting requirements of sections #fjab7;a7 and #fjag for all relevant taxable years with respect to the service provider1 or 7,c7 the service recipient demonstrates a basis for determining that the service provider is not an employee under this section and that such determination was made in good faith4 7#d7 ,notice date ,for purposes of this subsection1 the term notice date means the #cjth day after the earliest of-- 7,a7 the date on which the first letter of proposed deficiency which allows the service provider1 the service recipient1 or the payor an opportunity for administrative review in the ,internal ,revenue ,service ,office of ,appeals is sent1 7,b7 the date on which a deficiency notice under section #fbab is sent1 or 7,c7 the date on which a notice of determination under section #gdcf7;b77#b7 is sent4 7#e7 ,no restriction on administrative or judicial review ,nothing in this subsection shall be construed as limiting any provision of law which provides an opportunity for administrative or judicial review of a determination by the ,secretary4 7h7 ,definitions ,for purposes of this section-- 7#a7 ,service provider 7,a7 ,in general ,the term service provider means any qualified person who performs service for another qualified person4 7,b7 ,qualified person ,the term qualified person means-- 7i7 any natural person1 or 7ii7 any entity4 7#b7 ,service recipient ,the term service recipient means the person or entity for whom the service provider performs such ,service pursuant to a written contract4 7#c7 ,payor ,the term payor means any person or entity who pays the service provider for performing such service4 7i7 ,regulations ,notwithstanding section #ecj7;d7 of the ,revenue ,act of #aigh1 the ,secretary may issue regulations only to the extent that the ,secretary determines are necessary to carry out the provisions of this section4 7j7 ,rule of construction ,no provision of this section may be construed to expand the circumstances under which a service provider may be treated as an employee or a service recipient may be treated as an employer4 7k7 ,application in ordinary course of trade or business ,this section shall apply regardless of whether such service is performed in the ordinary or related course of a trade or business of the service recipient4 4 7b7 ,reporting ,section #fjda;,a of such ,code is amended by adding at the end the following new subsection3 7g7 ,special rules for certain persons classified as not employees ,in the case of any service recipient required to make a return under subsection 7a7 with respect to compensation to which section #ggjf7;a7 applies-- 7#a7 such return shall include-- 7,a7 the aggregate amount of such compensation paid to each person or entity whose name is required to be included on such return1 7,b7 the aggregate amount deducted and withheld under section #cdjb7s7 with respect to such compensation1 and 7,c7 an indication of whether a copy of the contract described in section #ggjf7;d7 is on file with the service recipient or payor1 and 7#b7 the statement required to be furnished under subsection 7e7 shall include the information described in paragraph 7#a7 with respect to the service provider to whom such statement is furnished4 ,terms used in this subsection which are also used in section #ggjf shall have the same meaning as when used in such section4 4 7c7 ,clerical amendment ,the table of sections for chapter #gi of such ,code is amended by adding at the end the following new item3 ,sec4 #ggjf4 ,determination of worker classification4 4 7d7 ,effective date ,the amendments made by this section shall apply to services performed after ,december #ca1 #bjaf4