TIP Improvement Act of 2026
Summary
What This Bill Does
This bill removes the FLSA tip-credit structure by requiring tipped employees to receive the section 6(a)(1) wage and retain all tips, while preserving tip pooling among employees who customarily and regularly receive tips. FLSA damages language is updated from tip-credit recovery to tips unlawfully used or kept by employers. The tax portion doubles the qualified tip deduction amount for joint returns, adds related-party and ownership-stake restrictions, requires a taxpayer identification number on the return, treats automatic gratuities as qualified tips for hospitality, food and beverage service, or cosmetology workers when the full amount is received by the worker or pooled under state or local law, strikes expiration-related text, and applies after 2025.
Who Benefits and How
Tipped employees, restaurant servers, hospitality workers, cosmetology workers, joint-filing tipped households, and employees in lawful tip pools benefit from full minimum wage pay, tip retention, a larger joint-return deduction, and automatic gratuity treatment.
Who Bears the Burden and How
Restaurants, hospitality employers, food service employers, cosmetology businesses, payroll departments, the Internal Revenue Service, and Labor Department wage investigators must administer higher cash wages, changed damages language, tip-deduction rules, TIN requirements, related-party restrictions, and automatic gratuity definitions.
Key Provisions
- Requires tipped employees to be paid the full federal minimum wage under FLSA section 6(a)(1).
- Protects employee retention of all tips while allowing tip pooling among customarily tipped employees.
- Expands and makes permanent the qualified tip deduction, including doubled joint-return amount and automatic gratuity treatment.
- Requires taxpayer identification numbers and bars related-party or ownership-stake tip deduction abuse.
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers with clause-level evidence links.
At a Glance
What This Bill Does
Requires tipped employees to be paid the full federal minimum wage while retaining tips, makes the qualified tip deduction permanent and larger for joint filers, and expands qualified tips to include automatic gratuities for hospitality, food service, and cosmetology workers.
Key Policy Areas
Labor, Tax, Hospitality
Primary Purpose
Requires tipped employees to be paid the full federal minimum wage while retaining tips, makes the qualified tip deduction permanent and larger for joint filers, and expands qualified tips to include automatic gratuities for hospitality, food service, and cosmetology workers.
Policy Domains
Bill-wide scope
Identified Gains
- Tipped employees
- Restaurant servers
- Hospitality workers
- Cosmetology workers
- Joint-filing tipped households
Identified Costs
- Restaurants
- Hospitality employers
- Food service employers
- Cosmetology businesses
- Internal Revenue Service
- Labor Department wage investigators
Legislative Progress
In CommitteeReferred to the Committee on Ways and Means, and in …
Introduced in House
Mr. Horsford introduced the following bill; which was referred to …
Stakeholder Effects
cui bono?How this legislation distributes effects. Mention counts reflect frequency, not effect magnitude.
Hospitality workers, Restaurant servers, Tipped employees
Internal Revenue Service, Labor Department wage investigators
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "primary_beneficiaries"
- → Tipped employees, Restaurant servers, Hospitality workers, Cosmetology workers, Joint-filing tipped households
- "primary_burden_bearers"
- → Restaurants, Hospitality employers, Food service employers, Cosmetology businesses, Internal Revenue Service, Labor Department wage investigators
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology