II
118THCONGRESS
1
STSESSION S. 45
To amend the Internal Revenue Code of 1986 to simplify reporting require-
ments, promote tax compliance, and reduce tip reporting compliance
burdens in the beauty service industry.
IN THE SENATE OF THE UNITED STATES
JANUARY24 (legislative day, JANUARY3), 2023
Mr. C
ARDIN(for himself and Mr. SCOTTof South Carolina) introduced the
following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to simplify
reporting requirements, promote tax compliance, and re-
duce tip reporting compliance burdens in the beauty serv-
ice industry.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Small Business Tax 4
Fairness and Compliance Simplification Act’’. 5
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SEC. 2. EXTENSION OF CREDIT FOR PORTION OF EM-1
PLOYER SOCIAL SECURITY TAXES PAID WITH 2
RESPECT TO EMPLOYEE TIPS TO BEAUTY 3
SERVICE ESTABLISHMENTS. 4
(a) E
XTENSION OFTIPCREDIT TOBEAUTYSERVICE 5
B
USINESS.— 6
(1) I
N GENERAL.—Section 45B(b)(2) of the In-7
ternal Revenue Code of 1986 is amended to read as 8
follows: 9
‘‘(2) A
PPLICATION ONLY TO CERTAIN LINES OF 10
BUSINESS.—In applying paragraph (1) there shall 11
be taken into account only tips received from cus-12
tomers or clients in connection with the following 13
services: 14
‘‘(A) The providing, delivering, or serving 15
of food or beverages for consumption, if the tip-16
ping of employees delivering or serving food or 17
beverages by customers is customary. 18
‘‘(B) The providing of beauty services to a 19
customer or client if the tipping of employees 20
providing such services is customary.’’. 21
(2) B
EAUTY SERVICE DEFINED .—Section 45B 22
of such Code is amended by adding at the end the 23
following new subsection: 24
‘‘(e) B
EAUTYSERVICE.—For purposes of this sec-25
tion, the term ‘beauty service’ means any of the following: 26
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‘‘(1) Barbering and hair care. 1
‘‘(2) Nail care. 2
‘‘(3) Esthetics. 3
‘‘(4) Body and spa treatments.’’. 4
(b) C
REDITDETERMINEDWITHRESPECT TOMIN-5
IMUMWAGE INEFFECT.—Section 45B(b)(1)(B) of the 6
Internal Revenue Code of 1986 is amended— 7
(1) by striking ‘‘as in effect on January 1, 8
2007, and’’; and 9
(2) by inserting ‘‘, and in the case of food or 10
beverage establishments, as in effect on January 1, 11
2007’’ after ‘‘without regard to section 3(m) of such 12
Act’’. 13
(c) E
FFECTIVEDATE.—The amendments made by 14
this section shall apply to taxable years beginning after 15
December 31, 2023. 16
SEC. 3. EMPLOYER TIP REPORTING SAFE HARBOR. 17
(a) I
NGENERAL.—Section 3121(q) of the Internal 18
Revenue Code of 1986 is amended— 19
(1) by striking so much as precedes ‘‘of this 20
chapter’’ and inserting the following: 21
‘‘(q) T
IPSINCLUDED FOR BOTHEMPLOYEE AND 22
E
MPLOYERTAXES.— 23
‘‘(1) I
N GENERAL.—For purposes’’; and 24
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(2) by adding at the end the following new 1
paragraph: 2
‘‘(2) T
IP PROGRAM SAFE HARBOR .—In the case 3
of an employer who employs one or more employees 4
who receive tips in the course of such employment 5
which are attributable to the performance of beauty 6
services (as such term is defined in section 45B) are 7
considered remuneration for such employment under 8
this section, no IRS tip examination with respect to 9
such employer shall be initiated (except in the case 10
of a tip examination of a current or former em-11
ployee) if the employer— 12
‘‘(A) establishes an educational program 13
regarding applicable laws relating to proper re-14
porting of tips received by employees for— 15
‘‘(i) new employees, which shall in-16
clude both verbal explanation and written 17
materials, and 18
‘‘(ii) existing employees, which shall 19
be conducted quarterly, 20
‘‘(B) establishes procedures for tipped em-21
ployees to provide monthly reporting of cash 22
and charged services and related tip income of 23
at least $20 under section 6053(a), 24
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‘‘(C) complies with all applicable Federal 1
tax law requirements applicable to employers 2
for purposes of filing returns, and collection 3
and payment of taxes imposed, with respect to 4
tip income received by employees, and 5
‘‘(D) maintains employee records related 6
to— 7
‘‘(i) contact information for such em-8
ployees, and 9
‘‘(ii) gross receipts from any services 10
subject to tipping, and charge receipts for 11
such services, for a period of not less than 12
4 calendar years after the calendar year to 13
which the records relate.’’. 14
(b) E
FFECTIVEDATE.—The amendments made by 15
this section shall apply to taxable years beginning after 16
December 31, 2023. 17
SEC. 4. INFORMATION REPORTING OF INCOME FROM 18
SPACE RENTALS IN THE BEAUTY SERVICE IN-19
DUSTRY. 20
(a) I
NGENERAL.—Subpart B of part III of sub-21
chapter A of chapter 61 of the Internal Revenue Code of 22
1986, as amended by section 334(d) of Public Law 117– 23
328, is amended by adding at the end the following new 24
section: 25
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‘‘SEC. 6050AA. RETURNS RELATING TO INCOME FROM CER-1
TAIN RENTALS OF SPACE IN THE BEAUTY 2
SERVICE INDUSTRY. 3
‘‘(a) R
EQUIREMENT OF REPORTING.—Any person 4
who, in the course of a trade or business and for any cal-5
endar year, receives rental payments from two or more 6
individuals providing beauty services (as defined in section 7
45B(e)) aggregating $600 or more each for the lease of 8
space to provide such services to third-party patrons shall 9
make the return described in subsection (b) with respect 10
to each person from whom such rent was so received at 11
such time as the Secretary may by regulations prescribe. 12
‘‘(b) R
ETURN.—A return is described in this sub-13
section if such return— 14
‘‘(1) is in such form as the Secretary may pre-15
scribe, and 16
‘‘(2) contains— 17
‘‘(A) the name, address, and TIN of each 18
person from whom a rental payment described 19
in subsection (a) was received during the cal-20
endar year, 21
‘‘(B) the aggregate amount of such pay-22
ments received by such person during such cal-23
endar year and the date and amount of each 24
such payment, and 25
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‘‘(C) such other information as the Sec-1
retary may require. 2
‘‘(c) S
TATEMENTTOBEFURNISHED TOPERSONS 3
W
ITHRESPECT TOWHOMINFORMATIONISREQUIRED.— 4
‘‘(1) I
N GENERAL.—Every person required to 5
make a return under subsection (a) shall furnish to 6
each person whose name is required to be set forth 7
in such return a written statement showing— 8
‘‘(A) the name, address, and phone num-9
ber of the information contact of the person re-10
quired to make such a return, and 11
‘‘(B) the aggregate amount of payments to 12
the person required to be shown on the return. 13
‘‘(2) F
URNISHING OF INFORMATION .—The 14
written statement required under paragraph (1) 15
shall be furnished to the person on or before Janu-16
ary 31 of the year following the calendar year for 17
which the return under subsection (a) is required to 18
be made. 19
‘‘(d) R
EGULATIONS AND GUIDANCE.—The Secretary 20
may prescribe such regulations and other guidance as may 21
be appropriate or necessary to carry out the purpose of 22
this subsection, including rules to prevent duplicative re-23
porting of transactions.’’. 24
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(b) CLERICALAMENDMENT.—The table of sections 1
for subchapter A of chapter 61 of such Code is amended 2
by adding at the end the following new item: 3
‘‘Sec. 6050AA. Returns relating to income from certain rentals of space in the
beauty service industry.’’.
(c) EFFECTIVEDATE.—The amendments made by 4
this section shall apply to payments made after December 5
31, 2023. 6
SEC. 5. GAO STUDY. 7
Not later than 5 years after the date of enactment 8
of this Act, the Comptroller General shall conduct a study 9
and submit to the Committee on Small Business and En-10
trepreneurship of the Senate and the Committee on Fi-11
nance of the Senate a report detailing how the extension 12
of the employer social security credit under section 45B 13
of the Internal Revenue Code of 1986 (as amended by sec-14
tion 2 of this Act) has impacted employers and employees 15
with respect to Federal income tax compliance and bene-16
fits. 17
Æ
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