S45-118

1. Short title This Act may be cited as the Small Business Tax Fairness and Compliance Simplification Act.

2. Extension of credit for portion of employer social security taxes paid with respect to employee tips to beauty service establishments Section 45B(b)(2) of the Internal Revenue Code of 1986 is amended to read as follows: In applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services: The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary. The providing of beauty services to a customer or client if the tipping of employees providing such services is customary. Section 45B of such Code is amended by adding at the end the following new subsection: For purposes of this section, the term beauty service means any of the following: Barbering and hair care. Nail care. Esthetics. Body and spa treatments. Section 45B(b)(1)(B) of the Internal Revenue Code of 1986 is amended— by striking as in effect on January 1, 2007, and; and by inserting , and in the case of food or beverage establishments, as in effect on January 1, 2007 after without regard to section 3(m) of such Act. The amendments made by this section shall apply to taxable years beginning after December 31, 2023. (2)Application only to certain lines of businessIn applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services:(A)The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary.(B)The providing of beauty services to a customer or client if the tipping of employees providing such services is customary.. (e)Beauty serviceFor purposes of this section, the term beauty service means any of the following:(1)Barbering and hair care.(2)Nail care.(3)Esthetics.(4)Body and spa treatments..

3. Employer tip reporting safe harbor Section 3121(q) of the Internal Revenue Code of 1986 is amended— by striking so much as precedes of this chapter and inserting the following: For purposes by adding at the end the following new paragraph: In the case of an employer who employs one or more employees who receive tips in the course of such employment which are attributable to the performance of beauty services (as such term is defined in section 45B) are considered remuneration for such employment under this section, no IRS tip examination with respect to such employer shall be initiated (except in the case of a tip examination of a current or former employee) if the employer— establishes an educational program regarding applicable laws relating to proper reporting of tips received by employees for— new employees, which shall include both verbal explanation and written materials, and existing employees, which shall be conducted quarterly, establishes procedures for tipped employees to provide monthly reporting of cash and charged services and related tip income of at least $20 under section 6053(a), complies with all applicable Federal tax law requirements applicable to employers for purposes of filing returns, and collection and payment of taxes imposed, with respect to tip income received by employees, and maintains employee records related to— contact information for such employees, and gross receipts from any services subject to tipping, and charge receipts for such services, for a period of not less than 4 calendar years after the calendar year to which the records relate. The amendments made by this section shall apply to taxable years beginning after December 31, 2023. (q)Tips included for both employee and employer taxes(1)In generalFor purposes; and (2)Tip program safe harborIn the case of an employer who employs one or more employees who receive tips in the course of such employment which are attributable to the performance of beauty services (as such term is defined in section 45B) are considered remuneration for such employment under this section, no IRS tip examination with respect to such employer shall be initiated (except in the case of a tip examination of a current or former employee) if the employer—(A)establishes an educational program regarding applicable laws relating to proper reporting of tips received by employees for—(i)new employees, which shall include both verbal explanation and written materials, and(ii)existing employees, which shall be conducted quarterly,(B)establishes procedures for tipped employees to provide monthly reporting of cash and charged services and related tip income of at least $20 under section 6053(a),(C)complies with all applicable Federal tax law requirements applicable to employers for purposes of filing returns, and collection and payment of taxes imposed, with respect to tip income received by employees, and(D)maintains employee records related to—(i)contact information for such employees, and(ii)gross receipts from any services subject to tipping, and charge receipts for such services, for a period of not less than 4 calendar years after the calendar year to which the records relate..

4. Information reporting of income from space rentals in the beauty service industry Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986, as amended by section 334(d) of Public Law 117–328, is amended by adding at the end the following new section: Any person who, in the course of a trade or business and for any calendar year, receives rental payments from two or more individuals providing beauty services (as defined in section 45B(e)) aggregating $600 or more each for the lease of space to provide such services to third-party patrons shall make the return described in subsection (b) with respect to each person from whom such rent was so received at such time as the Secretary may by regulations prescribe. A return is described in this subsection if such return— is in such form as the Secretary may prescribe, and contains— the name, address, and TIN of each person from whom a rental payment described in subsection (a) was received during the calendar year, the aggregate amount of such payments received by such person during such calendar year and the date and amount of each such payment, and such other information as the Secretary may require. Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing— the name, address, and phone number of the information contact of the person required to make such a return, and the aggregate amount of payments to the person required to be shown on the return. The written statement required under paragraph (1) shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made. The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purpose of this subsection, including rules to prevent duplicative reporting of transactions. The table of sections for subchapter A of chapter 61 of such Code is amended by adding at the end the following new item: The amendments made by this section shall apply to payments made after December 31, 2023. 6050AA.Returns relating to income from certain rentals of space in the beauty service industry(a)Requirement of reportingAny person who, in the course of a trade or business and for any calendar year, receives rental payments from two or more individuals providing beauty services (as defined in section 45B(e)) aggregating $600 or more each for the lease of space to provide such services to third-party patrons shall make the return described in subsection (b) with respect to each person from whom such rent was so received at such time as the Secretary may by regulations prescribe.(b)ReturnA return is described in this subsection if such return—(1)is in such form as the Secretary may prescribe, and(2)contains—(A)the name, address, and TIN of each person from whom a rental payment described in subsection (a) was received during the calendar year,(B)the aggregate amount of such payments received by such person during such calendar year and the date and amount of each such payment, and(C)such other information as the Secretary may require.(c)Statement To be furnished to persons with respect to whom information is required(1)In generalEvery person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing—(A)the name, address, and phone number of the information contact of the person required to make such a return, and(B)the aggregate amount of payments to the person required to be shown on the return.(2)Furnishing of informationThe written statement required under paragraph (1) shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.(d)Regulations and guidanceThe Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purpose of this subsection, including rules to prevent duplicative reporting of transactions.. Sec. 6050AA. Returns relating to income from certain rentals of space in the beauty service industry..

6050AA. Returns relating to income from certain rentals of space in the beauty service industry Any person who, in the course of a trade or business and for any calendar year, receives rental payments from two or more individuals providing beauty services (as defined in section 45B(e)) aggregating $600 or more each for the lease of space to provide such services to third-party patrons shall make the return described in subsection (b) with respect to each person from whom such rent was so received at such time as the Secretary may by regulations prescribe. A return is described in this subsection if such return— is in such form as the Secretary may prescribe, and contains— the name, address, and TIN of each person from whom a rental payment described in subsection (a) was received during the calendar year, the aggregate amount of such payments received by such person during such calendar year and the date and amount of each such payment, and such other information as the Secretary may require. Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing— the name, address, and phone number of the information contact of the person required to make such a return, and the aggregate amount of payments to the person required to be shown on the return. The written statement required under paragraph (1) shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made. The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purpose of this subsection, including rules to prevent duplicative reporting of transactions.

5. GAO Study Not later than 5 years after the date of enactment of this Act, the Comptroller General shall conduct a study and submit to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Finance of the Senate a report detailing how the extension of the employer social security credit under section 45B of the Internal Revenue Code of 1986 (as amended by section 2 of this Act) has impacted employers and employees with respect to Federal income tax compliance and benefits.