H.R. 7870 — Introduced in House

I 118th CONGRESS 2d Session H. R. 7870 IN THE HOUSE OF REPRESENTATIVES April 5, 2024Mr. Bacon introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide that certain tips shall not be subject to income or employment taxes for a period of 5 years. 1. Short title This Act may be cited as the Tip Tax Termination Act. 2. Exclusion from gross income of certain tipped wages (a) In general Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 139I the following new section: 139J. Certain tipped wages (a) In general Gross income shall not include so much of the eligible tips received by an individual during the taxable year as does not exceed $20,000. (b) Eligible tips For purposes of this section, the term eligible tips means amounts received while performing services which constitute employment in a position which generally relies on tips as part of wages, including cosmetology, hospitality, and food service. (c) Denial of double benefit (1) In general Except as provided in paragraph (2), any amount which is excluded from gross income under this section shall not be taken into account in determining any deduction or credit under this chapter. (2) Exception for child tax credit; earned income credit The amount excluded from gross income under this section shall be taken into account for purposes of determining the credits under sections 24 and 32. (d) Termination This section shall not apply to tips received after December 31, 2028. . (b) Application to employment taxes (1) Social security taxes (A) In general Section 3121(a)(12) of such Code is amended by striking— (A) tips and inserting Except as provided in section 139J— (A) tips . (B) Trust funds held harmless There are hereby appropriated to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and the Federal Hospital Insurance Trust Fund amounts equivalent to the reduction in revenues to each such Trust Fund, respectively, by reason of the amendment made by subparagraph (A) (determined without regard to this subparagraph). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had this section not been enacted. (2) Unemployment Taxes Section 3306(s) of such Code is amended by striking For purposes of this chapter and inserting Except as provided in section 139J, for purposes of this chapter,. (3) Wage withholding Section 3401(a)(16) of such Code is amended by striking— (A) tips and inserting Except as provided in section 139J— (A) tips . (c) Clerical amendment The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139I the following new item: Sec. 139J. Certain tipped wages. . (d) Effective date The amendments made by this section shall apply to amounts received after December 31, 2023.